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U.S. consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.

Reuters reported that other data today (July 12) showed first-time applications for unemployment benefits dropped to a two-month low last week as the labor market continues to tighten. The Fed raised interest rates in June for a second time this year and has forecast two more rate hikes before the end of 2018.

“U.S. inflation continues to drift gradually higher in response to a nearly fully employed economy, with some nudging from tariffs,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “The Fed has every reason to pull the rate trigger again in October.”

The Labor Department said its Consumer Price Index edged up 0.1% as gasoline price increases moderated and the cost of apparel fell. The CPI rose 0.2% in May. In the 12 months through June, the CPI increased 2.9%, the biggest gain since February 2012, after advancing 2.8% in May.

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