but a steady moderation in underlying inflation pressures supported financial market expectations that the Federal Reserve would not raise interest rates next month.

The report from the Labor Department last week showed the annual increase in consumer prices excluding the volatile food and energy components last month was the smallest in two years.

Economists expected the jump in rents, which was at odds with the rising supply of multi-family housing and independent surveys showing asking rents declining, to reverse in the coming months. With the labor market still tight, however, reaching the Fed's 2% inflation target could be a long slog, making it likely that the U.S. central bank could keep rates elevated for longer. Higher U.S. Treasury yields and conflict in the Middle East are also likely to discourage the Fed from tightening monetary policy further.