UPDATE 1-U.S. import prices post second monthly drop on weak petroleum costs

WASHINGTON, July 18 (Reuters) - U.S. import prices fell for a second straight month in June amid further declines in the cost of petroleum products, suggesting inflation pressures could remain benign for a while.

The Labor Department said on Tuesday that import prices decreased 0.2 percent last month after an upwardly revised 0.1 percent decline in May.

Economists had forecast import prices slipping 0.2 percent in June after a previously reported 0.3 percent drop in May.

In the 12 months through June, import prices increased 1.5 percent. That was the smallest gain since last November and followed May's 2.3 percent increase. The year-on-year increase in import prices has slowed sharply since posting 4.7 percent in February, which was the biggest advance in five years. U.S. financial markets were little moved by the report, which came on the heels of data last week showing consumer prices unchanged in June and the annual CPI rate increasing 1.6 percent - the smallest rise since October 2016.

Low oil prices are largely curbing both domestic and imported inflation pressures. Other factors such as declining prices for mobile phone services have also contributed to pushing inflation below the Federal Reserve's 2 percent target.

Fed Chair Janet Yellen told lawmakers last week that the recent ebb in inflation was partly the result of "a few unusual reductions in certain categories of prices" that would eventually drop out of the calculation.

Persistently low inflation will likely have an impact on the timing of a third interest rate increase this year from the U.S. central bank, which most economists expect would be in December.

Last month, prices for imported petroleum fell 2.2 percent after decreasing 1.2 percent in May. Imported petroleum prices have not risen since gaining 0.8 percent in February.

Import prices excluding petroleum edged up 0.1 percent after being unchanged the prior month. Import prices excluding petroleum increased 1.4 percent in the 12 months through June.

Prices for imported capital goods rose 0.2 percent, the largest increase since May 2014. Imported motor vehicle prices fell 0.2 percent, while the cost of imported food increased 0.9 percent.

The report also showed export prices dropped 0.2 percent in June as falling vegetable, soybeans and fruit prices weighed on agricultural exports. Export prices fell 0.5 percent in May.

They rose a modest 0.6 percent year-on-year, the smallest gain since prices started rising in December, curbed by lower export prices for soybeans, fruit and corn. Export prices gained 1.5 percent in the 12 months through May.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)