Consumers prices post best reading in 6 months

WASHINGTON -- Consumer inflation, which had been pushing relentlessly higher, posted its mildest reading in six months in February as the costs of energy and food moderated. The relief was expected to be short-lived, given that energy prices have resumed their upward climb.

The Labor Department reported Friday that consumer prices were unchanged last month, a much better performance than the 0.3 percent gain that had been expected.

Core inflation, which excludes energy and food, was also well-behaved, with an unchanged reading in February following a worrisome 0.3 percent jump in January.

The better-than-expected February inflation reading will likely be reversed in coming months, considering the big surge in energy prices in recent weeks. Crude oil hit a record high this week above $110 per barrel and gasoline pump prices jumped to a national record of $3.267.

But for February, energy prices posted a 0.5 percent decline with gasoline prices falling by 2 percent, the biggest drop since last August.

Food costs, which have been surging, also moderated a bit, rising by 0.4 percent following a huge 0.7 percent jump in January.

The price of vegetables, fruit, poultry and pork all declined. But the price of cereal and bakery products shot up by 1.8 percent, its largest monthly increase since January 1975. Part of the rise in food costs reflects higher energy prices which raise transportation costs. Also food prices have been under upward pressure because of the increased demand for corn to use in the production of ethanol.

The flat reading for core inflation in February left underlying inflation rising by 2.3 percent over the past 12 months, still above the Federal Reserve Board's comfort range of 1 percent to 2 percent.

But the good reading in February should bolster the view that the central bank will move aggressively to cut interest rates next Tuesday in an effort to battle spreading economic weakness.

Many private analysts believe the Fed will cut rates by as much as a half-point to three-fourths of a point, seeking to either prevent a full-blown recession or at least moderate its effects.