But the overall CPI edged up 0.1% last month, held back by cheaper gasoline and food, matching May's rise.
The Consumer Price Index-based (CPI) inflation for June and the Index of Industrial Production (IIP) data for May are due to be released later on Friday. The primary PPI is expected to have risen 1.6% for the month over last year, slower than the 1.8% year-over-year increase in May. Signs of a pick-up in underlying inflation and a strong labour market reported by the Labour Department on Thursday, however, further tempered financial market expectations of a 50 basis point cut at the end of the month and views that the Fed would lower borrowing costs at least twice this year. "This argues against aggressive monetary stimulus from the central bank", said Chris Rupkey, chief economist at MUFG in NY.
Costlier package holidays accounted for CPI gains in June, which rose by 6.1% following a 9% drop in the month before, influenced by the late Whitsun holiday this year. Because the PCE index is below the Fed's 2% target, Fed chair, Jerome Powell, noted in testimony before the US Congress that the US central bank believes that reduced inflation could persist. 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.
Meanwhile, used auto prices spiked 1.6 percent and an uptick in medical care costs also helped lift the index, according to the data. Powell on Wednesday said "there is a risk that weak inflation will be even more persistent than we now anticipate".
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In the wake of the Great Recession, two percent has been the Fed's target for core inflation.
The number of Americans filing applications for unemployment benefits dropped to a three-month low last week, suggesting sustained labour market strength that could support a slowing economy.
According to a Reuters survey, some economists expect the Reserve Bank of India (RBI) will cut rates in August for the fourth consecutive time since February to enhance liquidity after the government's annual budget last week lacked any direct steps to boost the economy. Manufacturing is struggling, the trade deficit is widening again, consumer spending is rising moderately and the housing sector remains mired in a soft patch. The average cost of premium fuels rose by 2.4 per cent, while the cost of automobiles increased by 0.2 per cent.
The rent sector dipped 0.1 per cent. Healthcare costs increased 0.3 per cent, after a similar advance in May. The food index was unchanged as the index for food away from home rose but the index for food at home declined.