By John S. McClenahen On a seasonally adjusted basis, the U.S. Labor Department's closely watched Consumer Price Index (CPI) for all urban consumers rose 0.6% in May, two-tenths of a percentage point higher than most economists predicted. Driven by rising energy prices -- up 4.6% last month -- it was the largest one-month increase so far this year. However, the so-called core CPI -- which strips out changes in food and fuel prices -- rose only 0.2% in May, matching its lowest monthly levels of the year. And that, claims New York-based Merrill Lynch & Co., is likely to limit the Federal Open Market Committee's June 30 expected increase in the federal funds target rate to 25 basis points. The target rate is now a four-decade low of 1%. Meanwhile, as the CPI was rising, real average weekly earnings were on the way down. A 0.3% increase in average hourly earnings in May was more than offset by a 0.7% increase in the CPI for urban wage earners and clerical workers, the Labor Department reported on June 15. In a separate economic release, the U.S. Commerce Department reported June 15 that business inventories at the end of April totaled $1.212 trillion, up 0.5% from their end-of-March level. Retail inventories, up 1.1%, led the increase, and "most of the gain in retail inventories came from the auto sector, where inventories jumped 2%," notes Merrill Lynch. Manufacturers' inventories rose 0.4% in April, the same as in March.