July saw U.S. consumer prices rise at the slowest pace in five months, indicating that the price pressure remains tamed as the economy improves, the Labor Department reported Tuesday.
The Consumer Price Index (CPI), a main gauge of inflation, increased 0.1 percent on a seasonally adjusted basis in July, after an increase of 0.3 percent in June. Over the last 12 months, the index increased 2.0 percent before seasonal adjustment.
Consumer prices in July were primarily driven by rising food prices, which were up 0.4 percent. Energy prices decreased for the first time since March.
Excluding the volatile food and energy categories, the so-called core CPI rose 0.1 percent in July, the same as in June. The core CPI was up 1.9 percent in the past 12 months, which was in line with the Federal Reserve's inflation target of 2 percent.
Economists monitor core prices to get a sense of broader inflation trend, a key barometer for monetary policy decisions of the central bank. The rising core prices indicate that U.S. inflation has bottomed out and is heading back toward the Fed's target. That should comfort those Fed officials who have fretted that inflation is running too low.
The central bank started a two-day monetary policy meeting on Tuesday. Economists expect the Fed to continue trimming its monthly bond purchase program, and wait until 2015 to begin raising its benchmark interest rates.