U.S. dollarsU.S. consumer prices were unchanged in July and actually declined around two percent from the same time a year ago.

Friday's Labor Department report shows inflation dropping at the sharpest rate in decades.

Someanalysts say these readings show inflation is tame for the time being,which will allow the U.S. central bank to keep interest rates athistoric lows.

The Federal Reserve lowers interest rates to bolster the economy, but raises them to fight inflation.

Inflationis being kept in check by the worst slump in consumer spending since1980, which reduces demand for goods and services and gives companiesless power to raise prices.

A separategovernment report shows production at U.S. factories, mines andutilities rose half a percent in July. It is only the second monthlyboost for industrial production since the recession began in 2007, andreflects increased output by recovering auto companies.

Friday'seconomic news follows a series of downbeat reports earlier this weekthat showed retail sales and business inventories down, jobless claimsup, and home foreclosures at another record high.

Some information for this report was provided by AP and Reuters.