DATA SNAP: JUNE CPI, CORE ADVANCE WITHIN EXPECTATIONS

U.S. consumer prices grew moderately last month, as energy costs retreated sharply, while underlying inflation advanced within market expectations.

The consumer price index rose 0.2% in June, the Labor Department said Wednesday, down from May's 0.7% rise. The core CPI, which excludes volatile food and energy prices, advanced 0.2%, up from the previous month's 0.1% increase.

Unrounded, the CPI rose 0.191% last month. The core CPI advanced 0.232% unrounded.

The data were broadly in line with Wall Street forecasts. The median forecast of 24 economists surveyed by Dow Jones Newswires was for a 0.1% CPI increase and 0.2% core rise.

Overall consumer inflation was up 2.7% from a year ago. The core CPI, in contrast, was up 2.2% compared to a year ago, unchanged from May's yearly rate. Over the past three months, the core CPI has grown at a 2.3% annualized rate.

Later Wednesday morning, Fed Chairman Ben Bernanke will deliver his semiannual testimony to Congress, where Fed watchers will be on the lookout for any indication that the central bank has changed its views on inflation or economic growth.

But so far, the Fed's longstanding forecast for a mix of moderate growth and falling core inflation seems to be unfolding. The Fed has held the federal funds rate unchanged at 5.25% for eight meetings dating back one year and has repeatedly warned that inflation remains the predominant risk, a warning Bernanke is expected to repeat today.

In turn, financial markets have largely abandoned hopes that the Fed will lower interest rates this year.

Wednesday's CPI report will likely reinforce the Fed's view that inflation is a key risk to the economy, with core inflation still at the upper end of the central bank's implied comfort zone.

Energy prices last month decreased by 0.5%, according to Wednesday's report, a marked retreat from May's 5.4% advance. Gasoline prices fell 1.1%. Natural gas prices fell 0.1%, while electricity prices also fell 0.1%.

Food prices increased 0.5%.

Medical care prices increased 0.2%.

Housing, which accounts for 40% of the CPI index, rose 0.3%. Rent climbed by 0.3%. Owners' equivalent rent was up 0.2%. Lodging away from home was up 2.5%.

Clothing prices fell 0.6%. Education and communication prices were flat for the month.

In a separate report, the Labor Department said the average weekly earnings of U.S. workers, adjusted for inflation, increased 0.5% in June. Average hourly earnings and average weekly hours each increased 0.3%.