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US consumer prices up because of higher gas costs
US consumer prices rise by most in 10 months because of higher gas costs; core inflation tame
By The Associated Press

WASHINGTON (AP) ' A sharp jump in gas prices drove a measure of U.S. consumer costs up in February. But outside higher pump prices, inflation stayed mild.

The Labor Department said Friday that the consumer price index rose 0.4 percent in February, the largest increase in 10 months. Gas prices rose 6 percent to account for most of the gain.

Food prices were unchanged for the first time in 19 months. And excluding food and energy, so-called "core" prices rose just 0.1 percent.



In the past 12 months, consumer prices have risen 2.9 percent, the same year-over-year change as last month. Core prices have increased 2.2 percent over the same period. That's lower than January's year-over-year figure.

Mild inflation allows the Fed to maintain its low interest-rate policy.

Most economists expect inflation to remain in check this year. The prices of agricultural commodities such as corn and cotton have come down. And while more Americans are working, few are getting big pay raises. That has limited retailers' ability to charge more.

Still, gas prices keep rising and could slow growth if consumers cut back on other purchases. The average price for a gallon of gas on Friday was $3.83, according to AAA. That's 32 cents higher than a month ago.

The Fed noted the increase Tuesday after its one-day policy meeting. Fed policymakers said they expect rising energy prices to temporarily boost inflation but longer-term inflation should remain stable. The Fed also reiterated its plan to keep its short-term interest rates near zero until at least 2014.

A report Wednesday indicated that inflation pressures also aren't increasing much at the wholesale level. The producer price index, which measures price changes before they reach the consumer, rose 0.4 percent. The gain was largely because of higher gas prices. Excluding food and gas, core wholesale prices rose just 0.2 percent

A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.

Lower price growth also leaves more money in consumers' pockets, boosting their buying power and supporting economic growth. The jump in gas and food prices early last year limited Americans' ability to buy other goods, slowing the economy.


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