Consumer prices were unchanged in June, held down by cheaper gas. Outside the volatile food and energy categories, inflation was mild.

The Labor Department said Tuesday that gas prices fell in June by a seasonally adjusted 2 percent, the third straight decline. Food prices edged up 0.2 percent after a flat reading in May.

Outside the volatile food and energy categories, so-called "core" prices rose 0.2 percent last month. It was the fourth straight increase of that size.

The flat reading on overall prices comes after the consumer price index fell 0.3 percent in May and was unchanged in April.

Mild price increases leave consumers with more money to spend, which spurs more growth. Lower inflation also gives the Federal Reserve room to launch new programs intended to boost the economy.

The inflation report comes as Fed Chairman Ben Bernanke kicks off two days of testimony on Capitol Hill. He will appear before the Senate Banking Committee Tuesday and a House panel Wednesday. His remarks will be watched for any hints that the Fed is preparing to take further action to try to accelerate growth.

At its June 19-20 policy meeting, the Fed agreed to extend a program that alters its bond portfolio to try to lower long-term interest rates. The aim is to inspire more borrowing and spending. And minutes of that meeting show a growing number of members are open to adopting further stimulus measures, such as launching another round of bond buying. But policymakers are at odds over whether the economy needs more help now.

Hiring has slowed sharply after a fast start to the year. And a report Monday said Americans spent less at retail businesses for a third straight month in June.

But inflation, at least, isn't a problem. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

In the 12 months that ended in May, consumer prices rose 1.7 percent, much lower than the 12-month increase of 2.3 percent in April. That's below the Fed's 2 percent target for inflation. Core prices have risen 2.3 percent in the past year.

Gas prices have tumbled more than 50 cents a gallon since peaking in early April, although they may be leveling off. On Monday, the average nationally price for a gallon of gas averaged $3.40, according to AAA. That's two cents higher than the previous week, but still 11 cents lower than a month earlier.

A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.

The economy is growing but at a sluggish pace. That is keeping a lid on price increases. Slow growth makes it harder for consumers and businesses to pay higher costs. The economy expanded at just a 1.9 percent annual rate in the January-March quarter. Many economists expect growth slowed further in the April-June quarter.