U.S. consumer prices edged up in July while a measure of manufacturing activity in New York this month dipped slightly, according to data released on Wednesday that was unlikely to sway an inflation-wary Federal Reserve.

The Consumer Price Index, a key inflation gauge, rose a slightly smaller-than-expected 0.1 percent as gasoline prices fell during the month, the Labor Department said. Economists polled by Reuters had expected a rise of 0.2 percent.

Core inflation, which excludes volatile food and energy prices, rose 0.2 percent in July, matching forecasts.

Year-over-year, core CPI held steady at 2.2 percent for a third straight month.

The Fed said last week that inflation remained its predominant concern, although it acknowledged that a wobbly housing market had led to tightening credit terms for some households and businesses.

The July CPI readings don't make it any harder or easier for the Fed to cut interest rates, said Richard Huber, economist at A.G. Edwards and Sons in St. Louis. The trade deficit data we got yesterday will drive GDP numbers for the second quarter higher, which will allow the Fed to say that it's still focused on inflation

U.S. stock index futures extended losses after the CPI data, while the dollar held steady and Treasury debt prices were little changed.

Futures markets fully price an official interest rate cut at the September Federal Open Market Committee meeting after ending Tuesday with a 96 percent chance.

Stock markets from Tokyo to London were down sharply on Wednesday as investors worried that what started as problems in the U.S. subprime mortgage sector had triggered credit tightening around the globe, threatening economic growth.

Separately, the New York Federal Reserve said manufacturing activity in New York State factories slowed in August. The New York Fed's Empire State general business conditions index fell modestly to 25.06 in August from 26.46 in July.

(Additional reporting by Ellen Freilich)

Inflation Consumer price index