Cheap gas keeps consumer prices in check

Economic IndicatorsFOXBusiness

Lower costs for gas, airline tickets, new and used cars and wireless mobile phone plans kept U.S. consumer prices flat in June, evidence that inflation remains muted.

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The Labor Department says the unchanged reading followed a drop of 0.1 percent in May. Inflation has climbed just 1.6 percent from a year ago. That's down sharply from February, when prices rose 2.7 percent from a year earlier.

Falling gas prices have been a boon for drivers. During the 4th of July holiday weekend prices at the pump were the cheapest since 2005, as reported by FOX Business.

Friday, the national average was $2.25 per gallon, according to AAA. The average price of oil in the U.S. is averaging around $46 per barrel.

Excluding the volatile food and energy categories, prices rose 0.1 percent in June and 1.7 percent from a year earlier.

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As inflation has slowed, the Federal Reserve's plans to raise interest rates once more this year and three times next year have come under greater scrutiny. The Fed typically hikes rates to ward off rising inflation, yet price gains have declined this year.

Along with the lack of inflation, Fed Chair Janet Yellen is also managing an economy around policy making including tax reform.

While the Republicans have yet to lay out a concrete bill to reform the U.S. tax code, the White House has insisted that 3% GDP growth is achievable if taxes and regulations are overhauled. Yellen said the key to pushing economic growth higher is ramping up productivity, which — unfortunately — she said is very difficult to do.

“I think [tax reform] is something could have a favorable impact if appropriately done. Productivity growth is something – it’s very hard to move,” she said during her semi-annual testimony to Congress on Thursday covered by FOX Business. “It is challenging to move productivity growth up that much, but I hope that Congress and the administration will focus on changes that will succeed in accomplishing that. ”Productivity growth in the first quarter of 2017 averaged 1.2%, according to the Bureau of Labor Statistics. Yellen said in order for the administration to achieve its goal of 3% economic growth — that number would need to rise “to something over 2.”

The Associated Press contributed to this report.