Consumer inflation, up an as-expected 0.3 percent in June, isn’t soaring but, as Federal Reserve policy makers are predicting, underlying pressures are beginning to inch higher. The core also came in as expected at plus 0.2 percent which is up from 0.1 percent in May and with two-thirds of the gain tied to a 0.4 percent rise for owners’ equivalent rent in another indication of rising demand in the housing sector. Looking at year-on-year rates, total consumer inflation is up 0.1 percent which doesn’t look like much at all but is the first positive reading of the year. The core is up 1.8 percent, on the rise from 1.7 percent in May and closer to the Fed’s general 2 percent inflation target.

The gain in the overall rate was driven higher by a 1.7 percent rise for energy within which gasoline rose 3.4 percent in the month. This is exactly what the Fed has been pointing to, that is easing downward pull from energy prices. Food rose 0.3 percent in the month with egg prices a concern, up 18.3 percent in the month. Other gains include airfares at plus 2.0 percent and tobacco at plus 0.8 percent.

Pulling down the CPI was a record decline of 1.1 percent in hospital services that drove the medical care component to minus 0.2 percent in the month. Year-on-year, medical care is still on the high side compared to other prices, at plus 2.5 percent. Other readings on the negative side include apparel, down 0.1 percent in the month for a minus 1.8 percent year-on-year rate.

But the key story in this report is the incremental rise in the core rate with the rise in owners’ equivalent rent, the highest since way back in October 2006, a special concern. Today’s report is in line with expectations for a rate liftoff sometime later this year.