U.S. inflation flat in July

America's inflation rate remained flat on a monthly basis in July, as a slight decline in energy prices was offset by increases in the prices of food and other items.

The Department of Labour reported Wednesday that the country's consumer price index hasn't moved in any signficant direction since March, an indication the weak economy is keeping a lid on inflation.

Lower inflation gives U.S. policymakers more leeway to implement more stimulus programs and tinker with interest rates to get the world's largest economy humming again.

Prices increased by 1.4 per cent in the 12 months ended July, down from 1.7 per cent from June's level and the lowest it's been since November of 2010.

Lower prices may not last, however. A crippling drought across much of the midwest has devastated the agricultural sector, and the industry says that's bound to lead to higher prices for food as crop yields plummet.

"The rise in global foodstuff commodity prices has not translated into higher retail food costs," Scotiabank economist Derek Holt said in a note. Food costs were up by 0.1 per cent in July, by 0.2 per cent in June and flat in May — "by no means the type of surge that many pundits have expected," he noted.

And the energy price relief that Americans enjoyed in July is already showing signs of disappearing. The average national price for gas was $3.71 US  a gallon on Wednesday. That's up 31 cents from a month ago.

"This trend could well reverse itself starting in August," Holt noted.