What inflation? Producer prices rose less than expected in July, raising questions about recent concerns that price pressures were on the verge of breaking out after two years of dormancy.

The government said Friday that the producer price index rose 0.1%, while the core rate -- which excludes volatile energy and food costs -- rose the same amount.

The consensus estimates were for the headline rate to rise 0.2% and the core rate to inch up 0.1%.

It's the second month in a row of better-than-expected figures. Prices declined 0.3 in June after gaining 0.8% in May.

Food costs in July fell 1.6%, the second consecutive decline. Energy prices, however, rose 2.3%, after a sharp decline in June. It's the biggest increase since January.

In raising interest rates another quarter of a percentage point to 1.5% earlier this week, the

Fed

made reference to oil prices. "Inflation has been somewhat elevated this year, though a portion of the rise in prices seems to reflect transitory factors." Still, the central bank did not appear to be worried enough about inflation to alter its basic policy. "With underlying inflation still expected to be relatively low," the Fed's monetary policy committee said, "policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability."