Prices in the US crept up just 0.1 per cent in May in spite of the rising cost of fuel, easing fears that inflation could be looming as the economy starts to stabilise. Mortgage applications also fell to their lowest level since November, as the housing slump continued to deepen.

It was the first time in three months that the labour department’s consumer price index, a key measure of inflation, turned out to be lower than economists were expecting. They predicted a 0.3 per cent rise against the previous month.