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Prices Rose 0.2 Percent Last Month

August 18, 1998

WASHINGTON (AP) _ Inflation remained tame in July, despite hefty price increases for a scattering of products and services ranging from tomatoes to tobacco and from autos to air fares.

The Labor Department said today that its Consumer Price Index rose a seasonally adjusted 0.2 percent last month, as anticipated by analysts. For the year so far, inflation is running at a modest 1.5 percent annual rate, compared with 1.7 percent for all of last year.

Despite robust U.S. economic growth until very recently, inflation has remained contained, in part because the Asian economic crisis has contributed to a decline in world prices for commodities ranging from petroleum to pork.

Economists believe the lack of price pressures will lead Federal Reserve policy-makers, meeting behind closed doors today, to again opt for no change in short-term interest rates. They haven’t raised or lowered rates in 17 months.

Fed policy-makers have worried that labor shortages, and the resulting wage increases, would foster inflation. But they’re waiting to see how severely Asia slows U.S. growth.

It’s already sent the trade deficit climbing toward a record high, although in June the gap between exports and imports narrowed slightly to $14.15 billion, the Commerce Department said today.

In July, energy prices were unchanged as declines in fuel oil, gasoline and natural gas offset a small rise in electricity costs. Gasoline prices were 10 percent lower than a year earlier.

Food prices rose 0.2 percent. Fresh vegetables cost 1.3 percent more than the month before, with the seasonally adjusted price of tomatoes shooting up 11.3 percent. Poultry prices jumped 0.7 percent, reflecting a drought and heat wave across the South. Pork and beef costs rose modestly while coffee prices, a problem area last year, fell 0.3 percent.

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