U.S. consumer prices rose less than expected in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.
The Labor Department said on Friday the Consumer Price Index edged up 0.1 percent last month after being unchanged in June. That lifted the year-on-year increase in the CPI to 1.7 percent from 1.6 percent in June.
Economists polled by Reuters had forecast the CPI rising 0.2 percent in July and climbing 1.8 percent year-on-year.
Stripping out the volatile food and energy components, consumer prices gained 0.1 percent for the fourth straight month. The so-called core CPI rose 1.7 percent in the 12 months through July - it has now increased by the same margin for three straight months.
The modest gain in consumer prices could worry Fed officials who have largely viewed the retreat in inflation as temporary.
Fed Chair Janet Yellen told lawmakers last month that "some special factors," including prices for mobile phone plans and prescription drugs were partly responsible for the low inflation readings.
The U.S. central bank has a 2 percent inflation target and tracks a measure that has been stuck at 1.5 percent since May. Inflation remains tame despite the labor market being near full employment, a conundrum for the Fed as it contemplates tightening monetary policy further.