Price tags are pictured at a Ralphs grocery store in Pasadena, California U.S., December 1, 2016.
The core consumer price index (CPI), excluding food and energy prices, rose 0.3% in June over the month prior, exceeding expectations.
Low inflation and growing risks to the economy from a trade war between the United States and China, and cooling global growth are likely to see the Federal Reserve cutting interest rates this month for the first time in a decade.More news: OPEC forecasts oil demand to grow in 2020
The Bureau of Labor Statistics released the June Consumer Price Index data on Thursday morning. Year-over-year Core CPI (ex Food and Energy) came in at 2.13%, up from the previous month's 1.99% and above the Fed's 2% PCE target.
Economists polled by Reuters had forecast the CPI unchanged in June and core inflation gaining 0.2%.
Market participants will receive a gauge on USA producer price changes on Friday, a day after Federal Reserve Chair Jerome Powell concluded testimony to Congress reiterating central bankers' concerns of persistently below-target inflation.
Eric Winograd, senior USA economist at Alliance Bernstein, noted that both vehicles and apparel "had been negative for the last few months and so the bounce this month is more likely payback for previous weakness rather than the start of a new trend".More news: England beat Australia to reach Cricket World Cup final
But inflation remains tame over the past year, with the CPI slowing to 1.6 percent compared to June 2018, two tenths of a point lower than in May and the second straight year-on-year decline.
Meanwhile, used vehicle prices spiked 1.6 percent and an uptick in medical care costs also helped lift the index, according to the data. Wages have risen only modestly, and inflation has largely remained below the Fed's 2% annual target.
"As Powell also stated last month, 'Committee participants expressed concerns about the pace of inflation's return to 2%,'" Deutsche Bank economist Brett Ryan wrote in a note. Food prices rose 0.6%. Corn prices surged 19.9%, the largest rise since July 2015. Rent costs increased by 0.4% last month. Services were boosted by an increase in margins received by wholesalers and retailers.
The overall CPI edged up 0.1 per cent last month, held back by cheaper petrol and food prices. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment. Prices for doctor visits and dental care were unchanged last month. Healthcare costs increased 0.3%, after a similar advance in May. Those healthcare costs feed into the core PCE price index.More news: Lindelof agent hints at Barcelona interest