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U.S. consumer prices unchanged in June

WASHINGTON, July 14 (Reuters) - U.S. consumer prices were unchanged in June as the cost of gasoline and mobile phone services declined further, pointing to benign inflation that could cast doubts on the Federal Reserve's ability to increase interest rates for a third time this year.

The Labor Department said on Friday that the unchanged reading in its Consumer Price Index followed a 0.1 percent dip in May. The lack of a rebound in the CPI in June could trouble Fed officials who have largely viewed the recent moderation in price pressures as transitory.

In the 12 months through June, the CPI increased 1.6 percent - the smallest gain since October 2016 - after rising 1.9 percent in May. The year-on-year CPI has been softening steadily since February, when it hit 2.7 percent.

Economists polled by Reuters had forecast the CPI edging up 0.1 percent last month and climbing 1.7 percent from a year ago.

The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent in June, rising by the same margin for three straight months. The core CPI increased 1.7 percent year-on-year after a similar gain in May. (Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)