US consumer prices increase as expected in July

Traders work on the floor of the New York Stock Exchange in New York, Wednesday. EPA-Yonhap

WASHINGTON — U.S. consumer prices increased slightly in July, potentially weakening the argument for an interest rate increase from the Federal Reserve next month.

The Consumer Price Index edged up 0.1 percent last month after dropping 0.4 percent in June, which was the first decline in six years, the Labor Department's Bureau of Labor Statistics said on Wednesday.

In the 12 months through July, the CPI advanced 3.4 percent after rising 3.5 percent in June. Excluding the volatile food and energy components, the CPI gained 0.2 percent last month after being unchanged in June. The so-called core CPI increased 2.5 percent in the 12 months through July after climbing 2.6 percent in June.

Economists polled by Reuters had forecast the CPI rebounding 0.1 percent and core inflation rising 0.2 percent over the month.

The U.S. central bank tracks the Personal Consumption Expenditures price indexes for its 2 percent inflation target. The CPI report followed news last week of surprise job losses last month. Prior to the CPI report, financial markets saw a roughly 46 percent chance of a rate hike at the Fed's September 15-16 policy meeting, CME's FedWatch tool showed.

Policymakers will still get August's CPI and employment reports before that meeting. Economists expect the pace of consumer price increases to pick up in August, reflecting the recent increase in oil prices. Job growth is also expected to rebound as seasonal distortions fade. The Fed last month left its benchmark overnight interest rate in the 3.5 percent to 3.75 percent range.