Washington – Food costs kept rising in June, but motorists finally got some relief at the gas pump, helping to lower inflation to the smallest increase in five months.
The Labor Department reported Wednesday that consumer prices edged up by 0.2 percent in July. That was the best showing since January and far below the 0.7 percent surge of May, the biggest jump in nearly two years.
But with the use of corn for ethanol pushing up food costs and gasoline prices rising again in July, economists said the moderation in inflation could prove temporary.
Federal Reserve Chairman Ben Bernanke, delivering the Fed’s midyear economic report to Congress, said the Fed perceived inflation as its “predominant” concern.
The Fed closely watches core inflation, which excludes volatile energy and food costs. Those prices rose by 0.2 percent in June, extending a trend of moderation. The rise in the energy and food sectors has not led to wider inflationary problems.
As long as this continues, analysts said, the Fed will keep interest rates on hold probably into 2008. The Fed hasn’t changed rates in more than a year.
In a separate report, the Commerce Department said housing construction rose 2.3 percent in June to a seasonally adjusted annual rate of 1.467 million units.
Analysts discounted the unexpected increase, noting that applications for building permits fell 7.5 percent, more than double the decline forecast. Permits are considered a better indicator of future trends.
Gasoline prices, which hit a record of $3.23 in late May, fell by 1.1 percent in June, the first decline since a 3 percent drop in January.
Pump prices, however, have risen again in early July.
