A rise in housing costs pushed underlying US inflation up at its fastest rate in nine months in May, the US government reported today.
At the same time, falling energy costs kept overall consumer prices steady, said the report, which could soothe deflation fears.
The Consumer Price Index (CPI), the most widely used gauge of US inflation, was unchanged last month, but the so-called core CPI, which strips out volatile food and energy prices, advanced 0.3 per cent.
Core inflation had slowed sharply this year, heightening concerns the economy could tip into deflation, a potentially crippling economic condition in which the overall level of consumer prices drops.
But the latest rise in the core CPI helped pull the 12-month change in the underlying inflation rate up to 1.6 per cent, a tick above the 37-year low reached in April.
The department pinned most of May's rise in the core index to a 0.6 per cent climb in shelter costs, which include lodging away from home and the cost of housing for homeowners. It was the biggest gain in shelter costs in more than 12 years.
Officials at the Federal Reserve have said the risk of falling prices is small, although they acknowledge deflation, if it set in, could complicate their efforts to spur growth.
Fed Chairman Mr Alan Greenspan has said the potential costs of deflation warranted a "much wider firebreak" when it came to monetary policy than would normally be the case.
The Fed is widely expected to cut interest rates to a level not seen since 1958 at a meeting next week.