The prices consumers face were virtually flat in June, declining by 0.1%, according to the Bureau of Labor Statistics. This follows a 0.2% decline in May. While prices were technically deflationary in June, given the influence of food and energy, and the fact that this is a smaller fall than we saw in May, it probably isn't time to start worrying about deflation yet.
Let's start with some history of the Consumer Price Index (CPI), provided by BLS:
You can see that the price level has been extremely stable for the past year, and very close to zero. Over the past three months, it's declined -- but barely. And since that decline isn't ramping up, but slowed down a little in June, it's hard to get too riled up about deflation just yet.
Moreover, so-called "core" CPI, which excludes food and energy, actually rose by 0.2% in June. That's the biggest increase since October, but still pretty tiny. Here's the rolling three-month average:
Don't let the movement of the red line above here fool you. As you can see from the vertical axis, the entire line lies below 0.3% monthly inflation -- since the recession began. Again, this shows very stable prices with extremely low inflation. Over the past 12-months, inflation has risen by 1.0%.
As for various items in the basket, energy prices fell by the most, 2.9%. Food prices were flat in June. The biggest increases occurred with used cars autos and apparel, the prices of which rose by 0.9% and 0.8%, respectively.
Like we saw with producer prices yesterday, consumer prices are slightly deflationary, but at this time don't indicate much reason for concern. The price level appears to be quite stable for now. Unless that changes, it's pretty unlikely that the Federal Reserve will take any monetary policy action to combat either inflation or deflation.