Higher Energy Costs Lift Consumer Prices

[BeyondGeography]

By JEANNINE AVERSA, Associated Press Writer

WASHINGTON - Consumer prices rose by a modest 0.3 percent in February as high energy costs continued to hit the pocketbooks of drivers filling up at the pump and people heating their homes.

The increase in the Consumer Price Index (news - web sites), the government's most closely watched inflation measure, however, marked a slowdown from the 0.5 percent jump registered in January, the Labor Department (news - web sites) reported Wednesday.

Excluding energy and food costs, "core" consumer prices rose by just 0.2 percent in February for the second month in a row. That suggested the prices for many goods and services were fairly stable.

Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) and his colleagues said inflation is not a problem for the economy. That's one of the main reasons why Fed policy-makers have leeway to hold short-term interest rates at a 45-year low of 1 percent, as they did on Tuesday.

"With inflation quite low and resource use slack, the committee believes that it can be patient in removing its policy accommodation," the Fed said. Some private economists viewed that language, along with the Fed's concerns about slow job growth, as meaning Fed policy-makers may not move to raise rates until 2005. Short-term rates have been at 1 percent since June.

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