Higher energy lifts prices but inflation tame

WASHINGTON - December 16, 2009

The Consumer Price Index, the government's most closely watched inflation barometer, rose 0.4 percent in November, up from a 0.3 percent increase in October, the Labor Department said Wednesday.

But stripping out energy and food, all other prices were flat last month, signaling that inflation isn't rising through the economy. It was the first time this measure, known as "core" inflation, was unchanged, after 10 straight monthly increases.

The reading on overall inflation matched economists' forecasts. The showing on core inflation turned out even better than the tiny 0.1 percent increase analysts were expecting.

Looking ahead, companies will find it difficult to jack up prices when consumers are expected to remain cautious, the job market is weak and the recovery is slow, analysts say.

Wednesday's report gives the Fed, wrapping up a two-day meeting Wednesday, leeway to hold its key interest rate at a record low to nurture the recovery.

Federal Reserve Chairman Ben Bernanke says he thinks slack in the economy - meaning idle plants and the weak job market - will keep inflation in check.

Wednesday's report indicated that energy prices rose 4.1 percent last month, reflecting more expensive fuel oil and gasoline. Energy prices, though, are already in retreat. Oil prices are down about 10 percent this month.

Food prices, meanwhile, edged up 0.1 percent for the second month in a row. Falling prices for dairy products and nonalcholic drinks helped blunt small increases for meat, cereals and baked goods, and fruits and vegetables.

Elsewhere, prices for clothing fell as retailers struggled to lure shoppers. Costs for recreation and for shelter also were down. But prices for airline fares, new cars, medical care and tobacco products all rose.

Wednesday's report suggests that companies remain reluctant to pass along all their higher costs to customers.

The government on Tuesday reported that its Producer Price Index, which measures the costs of goods before they reach store shelves, jumped 1.8 percent in November. That was more than double the gain analysts had expected. Higher-priced energy products and truck played big roles in the increase.

Core prices rose 0.5 percent, the sharpest increase in more than a year.

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