U.S. CPI seen flat in July, core up 0.1 percent

WASHINGTON (Reuters) - Cheaper gasoline prices will likely temper U.S. inflation in July, with the rate on a year-over-year basis possibly at its lowest in more than 49 years, a Reuters survey showed.

Analysts surveyed by Reuters forecast the Consumer Price Index -- the most widely used measure of inflation -- would be unchanged in July from the previous month. That would follow June's 0.7 percent gain.

"Pricing pressures should continue to be contained as only tentative signs of a turnaround emerge," IHS Global Insight wrote in their outlook.

The core rate of inflation, which excludes food and energy and is considered a more reliable indicator, is expected to post a subdued 0.1 percent gain in July after rising 0.2 percent in June.

"Core consumer prices are likely to remain resilient, further dimming the threat of deflation," IHS Global Insight said.

Economists forecast year-over-year CPI down 2.0 percent, which would be the lowest level since January 1950 when it fell 2.1 percent, while the core rate is forecast up 1.6 percent, the lowest level since March 2004.

The Bureau of Labor Statistics will release the CPI report for July at 8:30 a.m. (1230 GMT) on Friday.

The following is a selection of comments from economists:

BMO CAPITAL MARKETS

Forecast: CPI: -0.1 percent

Core: flat

"Lower vehicle prices, the result of the cash-for-clunkers program, will brake consumer prices in July. Meantime, fueled additionally by lower gasoline prices, the total CPI should dip 0.1 percent, pulling the headline inflation rate deeper into negative territory."

MOODY'S ECONOMY.COM

Forecast: CPI: flat

Core: +0.1 percent

"The key development to watch for is how much core inflation slows. The stickiness of core inflation recently has been driven by core goods, a category for which we now expect inflation to pull back. Outside of energy, a key feature of the July CPI report will be the softer readings on vehicle prices, removing a key source of upward pressure on core inflation."

RBS

Forecast: CPI: -0.1 percent

Core: +0.1 percent

"In July, a special factor related to the government's cash-for-clunkers program may have put downward pressure on both the headline and the core figure. In other areas of the core, shelter costs probably remained tame, with both rent and owners' equivalent rent inching up. Meanwhile, food prices could have risen slightly in July."

(Polling by Bangalore Polling Unit)

(Reporting by Nancy Waitz; Editing by Kenneth Barry)