NEW YORK (CNNMoney.com) -- Retail prices for goods other than food and energy rose more than expected last month, the government said Wednesday.

The Consumer Price Index, the government's main inflation gauge, rose 0.2 percent in June after climbing 0.4 percent in May, the Department of Labor said. The number was in line with estimates from economists polled by Briefing.com.

But core CPI, which excludes volatile food and energy prices, rose by a higher-than-expected 0.3 percent. Economists were looking for a 0.2 percent rise in the core CPI.

"It shows that there is continued inflation pressure in the U.S. economy," said Drew Matus, a senior economist at Lehman Brothers.

Matus said the higher core number will pressure the Federal Reserve to keep raising interest rates, and he thinks they should.

"It's better to have slightly slower growth now than to risk inflation later," he said. "If the Fed controls inflation, growth will come."

The June increase left core CPI, considered by most economists to be the best gauge of the underlying inflation rate, up 2.6 percent from a year earlier - above the Fed's presumed comfort zone of about 2 percent. Moreover, the three-month annualized core rate stands at 3.6 percent, well above the Fed's comfort zone.

May's 0.3 percent gain in the core CPI was higher than expected, and sent stocks and bond prices tumbling on fears it would prompt the Fed to keep raising rates.

The Fed has raised its key lending rate, which currently stands at 5.25 percent, 17 consecutive times since June 2004 in a fairly predictable manner.

But the central bank's next move is a matter of widespread uncertainty on Wall Street, as Chairman Ben Bernanke and other Fed policy-makers have said any hike or pause will depend on the most recent economic data.

Wednesday's CPI numbers helped convince investors that another rate increase is imminent. Interest rate futures showed the likelihood of another hike jumped from 72 percent late Tuesday to 94 percent after the report's release.

There has been fear among some investors that the Fed will go too far in raising rates, cutting off capital for business, hurting economic growth and putting a dent in corporate profits.

But some worry that rising energy costs could cause inflation to start spiraling higher.

On Wall Street, stocks rose in early trading but bond prices fell after the report.

Bernanke is due to testify before the Senate Baking Committee later Wednesday morning.

(Correction: An earlier version of this story misstated the year-over-year rise in core CPI. CNNMoney.com regrets the error).

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