Some temporary weights on US inflation ease in July

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The U.S. Federal Reserve's favored measure of inflation increased last month at the pace expected by Wall Street for the first time this year.

Consumer prices outside food and energy rose 1.6per cent in the year through July, and the details behind the increase could bolster Fed Chair Jerome Powell's argument that some of the weakness in inflation this year owes to temporary factors that will lift with time.However, the Fed has been frustrated by underperforming prices during most months since it set a 2per cent inflation target in 2012.

Given the odd mix of factors conspiring to keep inflation below target, it may be too soon for the central bank to relax its guard against a slippage in inflation.Wall Street experts have been regularly caught off guard by weak consumer prices this year, which has helped fuel expectations for Fed interest rate cuts.The persistence of weak inflation despite a healthy job market would give the Fed more space to counter economic weakness created by the U.S.

Portfolio management costs weakened sharply in December and January following a plunge in the U.S. stock market. A subsequent recovery in equity prices has helped portfolio managers charge more for their services, although a recent stock market downturn might point to cooler price gains down the road.

 

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