Core CPI rises modest 0.2% in July

Reports Marketwatch,

Core consumer inflation eased back in July, rising just 0.2% after four months of 0.3% gains, the Labor Department said Wednesday.

The relatively tame 0.2% increase in core consumer price index could help keep the Federal Reserve on the sidelines at next month's policy meeting if August's inflation data do not worsen.

Core prices - which exclude food and energy costs - have risen 2.7% in the past year, the highest since late 2001. Core inflation is running about a half percentage point above the Fed's comfort zone.

So far in 2006, core prices are rising at a 3.1% annual pace, a key reason why the Fed increased overnight interest rates at 17 straight meetings over two years before pausing last week.

Meanwhile, soaring energy costs pushed the total CPI up 0.4% in July, as expected by economists surveyed by MarketWatch. The economists were expecting core prices to rise 0.3%, although a sizable number were predicting the 0.2% rise that was reported.

The CPI is up 4.1% in the past year, compared with a 4.3% increase in the 12 months ending in June