In the 12 months through June, the PPI rose 1.7%, the smallest gain since January 2017, slowing further from a 1.8% increase in May.
Fed chairman Jerome Powell on Wednesday told lawmakers that the United States central bank would "act as appropriate" to protect the economy from rising risks such as trade tensions and slowing global growth.
Excluding the volatile food and energy categories, the closely-watched "core" CPI rose 0.3 percent compared to May - the largest one-month gain in 18 months. It increased 1.6% year-on-year in June, slowing from May's 1.8% rise. The CPI rose 0.1 per cent in May.
The rate of inflation declined 0.2 percentage points from the 1.2 per cent measured in March. "This argues against aggressive monetary stimulus from the central bank", said Chris Rupkey, chief economist at MUFG in NY.
Inflation has remained tame throughout the record 10-year economic expansion, even as the unemployment rate has dropped to a very low 3.7%. The so-called core PPI increased 2.1% in the 12 months through June after advancing 2.3% in May.
The food inflation for the month is also estimated to be little changed at 1.8 percent to 1.9 percent, as compared to 2 percent in the previous month, resulting from higher vegetable prices. Wages have risen only modestly, and inflation has largely remained below the Fed's 2% annual target.
Rising prices for housing, used cars and medical care helped drive U.S. consumer inflation higher last month despite flat or falling costs for food and fuel, the government reported Thursday.
The tobacco and liquor sector rose 1 per cent, with the average cost of beer increasing by 2 per cent and the cost of wine rising by 1.6 per cent.
'There is a risk that weak inflation will be even more persistent than we now anticipate, ' said Powell. The index is expected to have risen just 2.1% over past year in June, which would mark the slowest pace since July 2017. Manufacturing is struggling, the trade deficit is widening again, consumer spending is rising moderately and the housing sector remains mired in a soft patch. However, the cost of hospital care increased a solid 0.4% in June. In June, owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3%, matching May's gain.
The rent sector dipped 0.1 per cent.
Food prices, which account for almost half of the inflation basket, have been rising since early this year, a dramatic shift from their deflationary path in late 2018.