Inflation was a no-show in July

WASHINGTON (AP) — Inflation was a no-show in July and likely will stay away for months to come, giving the Federal Reserve room to keep invigorating the economy with record-low interest rates.

That was the message economists took from a report Tuesday that wholesale prices fell over the past 12 months by the sharpest amount in 62 years of record- keeping — the latest sign that inflation is posing no threat.

“In this economy, there really is no pricing power at all,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

The Labor Department said wholesale prices sank 0.9 percent in July, triple the decline that economists had expected. Over the past year, wholesale prices have dropped 6.8 percent. That’s the biggest drop in records dating to 1947.

A steep decline in energy prices drove the overall drop. But even apart from energy and food prices, which tend to be volatile, inflation was calm. The so-called “core” inflation rate for wholesale goods — excluding food and energy — fell 0.1 percent in July. And over the past 12 months, the core rate has ticked up a moderate 2.6 percent.

Economists expect inflation to remain tame as the economy struggles to mount a sustained recovery. High unemployment, wary shoppers and tight credit imposed by a banking system still reeling from the financial crisis have kept a lid on prices.

“There is little reason to think that inflation will get out of control any time soon,” said Joel Naroff, chief economist at Naroff Economic Advisors.