The Consumer Price Index grew 0.5% in September on a seasonally adjusted basis, according to U.S. Bureau of Labor Statistics.
"PPI was a little bit better, but that doesn't really translate well to CPI", said Gennadiy Goldberg, an interest rate strategist at TD Securities in NY.
The dollar lost its earlier gains following the data as traders considered the impact on a likely quarter-point interest rate increase from the Federal Reserve in December.
Stock indexes were broadly higher, with the Dow rising 0.2% and the S&P 500 up 0.1%.
Scott Clemons, chief investment strategist for Brown Brothers Harriman in NY, said that "after a long stretch of consecutive highs in the market, with earnings, even if they are slightly disappointing" that is an excuse to sell off.
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The price index of a small basket in September 2017 compared to August 2017 was 100.7% and the overall increase since the beginning of the year (September 2017 compared to December 2016) has been 102.1%. The MSCI index reached a record high, as it has for seven of the past eight trading days.
"Overall, with temporary factors weighing on core inflation and the activity data still suggesting that economic growth is strong, we still think that the Fed will press ahead and raise rates in December", said Michael Pearce, U.S. economist at Capital Economics.
Gasoline prices spiked by 13.1 percent due to Hurricane Harvey and accounted for about three-fourths of the increase by the headline consumer price index.
The euro was down 0.15 percent to $1.1839 snapping four straight days of gains after rising to its highest since September 25 earlier in the session.
Bitcoin smashed through the $5,000 barrier for the first time and was up 10.1 percent.
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Meanwhile, sterling rose to its highest against the greenback since October 4. The food index increased 1.2% over the past year. Core prices had been expected to rise by 0.2 percent.
Excluding the volatile food and energy components, consumer prices gained 0.1 percent in September as the increase in rental accommodation slowed and the cost of new motor vehicles and medical care declined.
Against the euro, the dollar fell 0.3% to $1.1864 and was 0.4% lower versus the pound at $1.3315.
Spot gold added 0.6 percent to $1,301.41 an ounce.
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