Consumer prices rose 0.3 percent in July - the same as in June - primarily because higher gasoline costs pushed energy prices into their steepest climb in 10 months, the government said Friday.
The Labor Department said its Consumer Price Index increased for the sixth straight month, but for the year is up just 2.7 percent at an annual rate. That equals the moderate 2.7 percent advance for all of 1993.On Thursday, the department reported that its Producer Price Index, measuring inflation pressures before they reach the consumer, surged 0.5 percent last month. The July wholesale price gain was due almost entirely to sharply higher costs for gasoline, oil and coffee.
While inflation has remained subdued this year, analysts anticipate the Federal Reserve - worried about possible future inflation - will raise short-term interest rates next week for the fifth time this year.
"By hiking rates they are sending a signal the economy is too fast and something has to be done," said Carl Palash of MCM Moneywatch in New York City.
Friday's overall consumer price rise was in line with economists' predictions, and the core rate excluding volatile energy and food costs was even a little better than projected.
The underlying consumer inflation rate rose 0.2 percent in July, less than the 0.3 percent increase in each of the preceding two months. Most analysts had predicted a 0.3 percent rise in July for the core figure.
Energy costs in July rose 1.8 percent, the steepest climb since they rose 1.9 percent last October. The Labor Department said almost all of the increase was due to a 3.8 percent jump in motor fuels.
Food prices increased 0.5 percent last month, as declines for meats and dairy products partially offset rising costs of fresh fruits and vegetables and coffee.
The cost of beef and veal fell 1.2 percent, the best showing since they dropped 1.5 percent two years ago.
Coffee prices, which soared nearly 43 percent at the wholesale level, rose a record 22.4 percent for consumers.
Car finance costs increased 1.8 percent, on top of a 3.4 percent jump in June.
Analysts discounted most of the increases in advance of Friday's report.
"Seasonal factors will add to inflationary pressures" in July, said Donald Ratajczak of Georgia State University's Economic Forecasting Center in Atlanta. "They are less significant in August, however."
Still, there seemed to be a consensus among analysts that the Federal Reserve will boost short-term interest rates for the fifth time this year when the central bank's policy-setting Federal Open Market Committee meets Tuesday.
"The Federal Reserve is not looking at current inflation. It's worried about the future," said economist David Wyss of DRI-McGraw Hill, a forecasting service in Lexington, Mass.
Since February, the Fed has boosted the target rate that banks charge each other for overnight loans four times, taking it from 3 percent to 4.25 percent. Analysts expect another increase of either a quarter or half percentage point next week.
While inflation has been restrained, the Federal Reserve is worried that rising commodity prices and employment gains could signal shortages down the road that could cause more rapid inflation.
Inflation has been mild for more than three years, the best stretch in three decades. As measured by the Consumer Price Index, the cost of living was up 2.7 percent last year, following rises of 2.9 percent in 1992 and 3.1 percent in 1991.