The Labor Department reports on U.S. consumer prices in June. The report is scheduled to be released at 8:30 a.m. EDT Tuesday.
PRICES UP: The expectation is that prices rose 0.3 percent in June, according to a survey by data firm FactSet.
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INFLATION SPIKE: In May, prices rose more than they have in over a year, fueled by food, gasoline and airline fares. The department's consumer price index rose 0.4 percent. But over the past 12 months, consumer prices have risen 2.1 percent, a pace near the Federal Reserve's 2 percent inflation target.
Economists are looking for core inflation, which excludes food and energy costs, to increase 0.2 percent in June, down from a May increase of 0.3 percent.
Over the 12 months ending in May, core inflation is up 2 percent.
The June gain in overall prices is expected to reflected higher gasoline and meat prices. While airplanes ticket prices surged by the largest amount in 15 years in May, the expectation is that those prices moderated somewhat in June.
Energy prices likely kept rising last month and while economists are hoping for a slowdown in coming months, tensions in the Middle East and Ukraine could actually push energy prices higher.
The AAA says the nationwide average for a gallon of gas stood at $3.57 on Monday, down from $3.68 a month ago and an indication that energy prices may be easing slightly.
Food costs in May showed the biggest monthly gain since August 2011. Food costs have been driven higher this year by a variety of factors including a harsh winter and a drought in California.
The Federal Reserve is expected to keep interest rates exceptionally low as long as inflation does not show signs of moving beyond its targeted rate. The forecast of many analysts is that the Fed will keep a key short-term interest rate at a record low near zero over the next year with the first rate increase not occurring until the summer of 2015.
But analysts stress that this outlook depends heavily on prices remaining in check. Should there be signs that inflation is starting to accelerate, then the central rate could begin raising interest rates sooner, possibly in the spring of next year.
The Fed holds its two-day meeting next week, starting Tuesday. In delivering the central bank's twice-a-year report to Congress last week, Fed Chair Janet Yellen sent a strong signal that the central bank still believed the economy needed help despite recent solid job gains which have pushed the unemployment rate down to 6.1 percent, the lowest level in nearly six years.
Yellen acknowledged the improvement in the labor market but also noted that unemployment remains above the 5.2 percent to 5.5 percent range that Fed officials view as optimal. She said that while inflation had risen slightly, the increase is not occurring at a pace that the central bank views as a threat.
The Fed seeks to achieve maximum employment with inflation rising at a modest pace of around 2 percent a year.
Low inflation, the result of a deep recession which has kept the lid on labor costs, has allowed the Fed to keep interest rates at exceptionally low levels. The benchmark interest rate has been near zero since December 2008.
The harsh winter pushed the overall economy into reverse in the first three months of the year with growth falling at an annual rate of 2.9 percent. But analysts believe a solid rebound in the spring pushed growth up to between 2.5 percent and 3 percent and they see improvements in the labor market contributing to stronger consumer spending and even stronger growth in the second half of this year.