US consumer prices inched up just 0.1 percent last month as gasoline and car prices tumbled, the government said on Thursday in a report suggesting an inflation spike earlier this year was an aberration.
A separate report showed initial claims for jobless benefits gained less than expected last week, implying the job market was a touch stronger than analysts had thought. For the first time in weeks, the claims data appeared unaffected by hurricanes, the Labour Department said.
Like the overall consumer price index, the so-called core CPI, which strips out volatile food and energy prices, also moved up just 0.1 percent, the department said.
The report presented a tamer inflation picture than Wall Street had expected. Economists had looked for a mild 0.1 percent gain in the overall CPI, the most widely used gauge of US inflation, but had expected the core index to rise 0.2 percent.
"Inflation is well contained and not a problem," said Mark Zandi, chief economist at Economy.com in West Chester, Pennsylvania.
A pickup in core inflation earlier this year had sparked some concern that long-dormant inflation was stirring. The CPI, however, offered confirmation that prices have been kept in check, despite a big surge in the cost of oil.
The core index, closely eyed by officials at the Federal Reserve, has risen just 0.1 percent for each of the last three months, just a 1 percent increase at an annual pace.
Prices for US bonds and the value of the dollar were little changed after the data. Investors held to the view that the Fed would bump interest rates higher next week but was likely to pause at one of its last two meetings of the year to assess the impact of the rate-rise campaign initiated in June.
Energy prices, which had risen sharply earlier in the year, fell 0.3 percent in August on the heels of a big plunge in July. The cost of gasoline tumbled 1.4 percent as supplies remained ample and the summer driving season wound down.
The drop in gasoline offset a hefty rise in the price of fuel oil and increases for electricity and natural gas. Food costs moved up just 0.1 percent, the smallest increase since January, when prices were unchanged.
Vehicle prices slid 0.3 percent, and both apparel and recreation costs fell 0.2 percent. In contrast, housing and medical care costs both gained 0.2 percent.
Fed officials meet on Tuesday and are widely expected to raise overnight interest rates a quarter-percentage point to 1.75 percent, the third such "measured" step in the central bank's tightening cycle.
Policy-makers have made it clear they believe rates are too low for what appears to be a self-sustaining expansion. Still, analysts say benign inflation provides scope for the central bank to pause at either its November 10 or December 14 meeting.
Sluggish employment growth has been one of the economy's weak spots and some analysts have expressed concern the expansion could falter if hiring doesn't pick up.
Economists said the latest data on claims for jobless benefits suggested payrolls were expanding at a moderate pace.
First-time claims for state unemployment aid rose 16,000 to 333,000 in the week ended Sept. 11 from a revised 317,000 a week earlier, the department said. Wall Street had looked for claims to rise more sharply to 340,000.
The increase partially reversed a sharp drop at the start of the month that had been pinned in part on Hurricane Charley, which struck Florida in mid-August. A second storm, Hurricane Frances, hit the state during the Labour Day holiday weekend early this month, but its impact has yet to be seen.
A four-week moving average of initial claims, which smooths short-term volatility, held steady at 338,000 - a level economists view as consistent with a moderate pace of hiring.
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