US consumer prices up slight 0.1 percent in July

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Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months. A core CPI inflation pace at 1.7 percent is in line with a core PCE inflation pace, the Fed's preferred measure, at an unchanged 1.5 percent in July, much below the target rate of 2 percent.

In late trading, USA 10-year yields dropped to six-week lows of 2.182 percent after the data, compared with 2.211 percent late Thursday.

For July, the CPI report showed that monthly wireless phone charges dropped 0.3 percent.

Investors will keenly watch appearances later on Friday by Dallas Fed boss Robert Kaplan and Minneapolis Fed President Neel Kashkari for clues on inflation and the future path of rate hikes.

But with the labour market near full employment and economic growth accelerating, analysts expect the US central bank will announce a plan to start unwinding its massive bond portfolio at its policy meeting next month.

The U.S. consumer price index edged up 0.1 percent last month after being unchanged in June.

USA stock futures took the weaker-than-expected reading as good news turning from a flat to lower reading to registering small gains.

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Taking into account disappointing readings on US PPI which experienced the largest drop in 11 months in July, as well as today's softer US CPI, the odds for a third rate hike this year have diminished as inflation doesn't show any sign of approaching the Fed's target of 2%. The headline inflation rate rose 0.1 percentage point to a still tepid 1.7 percent year-on-year in July, while the core rate remained the same at 1.7 percent. Just when the Fed though it had won the inflation battle, victory was snatched from its hand's within a matter of months.

The US Federal Reserve has a 2% inflation target for the world's largest economy, although the measure that it tracks is now at 1.5%. The index for fruits and vegetables rose 0.5 percent after declining in June.

The modest gain in consumer prices could worry Fed officials, who have largely viewed the retreat in inflation as temporary.

The costs of hotel and motel stays plunged a record 4.9 percent in July, the biggest one-month on records that go back to 1997.

Prices in the USA rose by less than expected last month, as inflation in the economy remained tame.

US 30-year bond yields also fell to a six-week trough of 2.769 percent.

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