US inflation falls as Fed meets

US consumer prices fell slightly in August, dragged lower by tumbling gasoline prices, the government reported Wednesday ahead of a key Federal Reserve meeting on increasing interest rates.

The fresh data signalled a continued lack of inflationary pressure that would support the Fed undertaking its first rate hike in more than nine years.

The Labor Department said its consumer price index fell 0.1 percent last month, the first time CPI has pulled back in seven months.

Gasoline prices, which had risen for three months, tumbled 4.1 percent in August. Food prices rose a modest 0.2 percent for a second straight month.

Stripping out food and energy, which can be volatile, core CPI rose 0.1 percent in August, the same as in July.

The inflation picture on a 12-month basis also continued to be muted. Consumer prices were up 0.2 percent from August 2014 and core CPI rose 1.8 percent.

The tepid inflation data came as the Federal Open Market Committee, the Fed's policy arm, opens a two-day meeting Wednesday.

The Fed has signaled it wants to raise zero-level interest rates this year, but speculation is divided whether it will take that step at this week's meeting.

The central bank's target for price stability is 2.0 percent inflation over the longer term. Its preferred inflation measure, the personal consumption expenditures price index, was up just 0.3 percent in July from a year ago, and core PCE 1.2 percent.

But Fed officials have signaled they would not wait for inflation to near their target to raise the benchmark federal funds rate in the first hike in nine years.