Consumer Prices Rise 0.2 Percent in Jan.

WASHINGTON – Consumer inflation rose 0.2 percent in January, lifted by the largest increase in gasoline prices in four months and higher prices for fruits and vegetables, the government reported Wednesday.

The modest advance in the Labor Department's Consumer Price Index, a closely watched inflation gauge, came after consumer prices dipped by 0.1 percent in December.

One of the few benefits from the recession flowing to consumers is low inflation, which provides shoppers with plenty of bargains.

Excluding energy and food prices, which can swing widely from month to month, the "core" rate of inflation increased 0.2 percent in January, up slightly from a 0.1 percent advance the month before.

The latest reading on inflation at the consumer level was in line with many analysts' expectations and suggest that inflation is fairly well contained.

To revive the economy, the Federal Reserve slashed interest rates 11 times last year. The Fed could act so aggressively because inflation hasn't posed a risk to the economy.

For the 12 months ending in January, consumer prices rose by just 1.1 percent, the smallest increase since the 12 months ending December 1986.

Last month the Fed opted to leave interest rates unchanged and cited signs of a recovery as the reason.

Many economists believe the Fed's rate cuts will pave the way for solid economic growth in the second half of this year. In the meantime, analysts expect companies will continue to find it difficult to raise prices, which should keep inflation in check in the coming months.

In January, overall energy prices advanced 0.9 percent, after falling sharply in each of the prior three months. Gasoline prices went up 2.7 percent last month, the biggest increase since September.

Gasoline prices -- while still considered moderate -- were lifted by a firming of crude-oil prices last month, reflecting production cuts by oil-producing nations.

Natural gas prices rose 1.2 percent in January, the largest advance since May. However, fuel oil prices dropped by 1.7 percent and electricity prices declined by 1.2 percent, the biggest drop since February 1998.

Food prices, meanwhile, rose 0.3 percent in January, after being flat in December. Vegetable prices climbed 4.1 percent last month, the biggest increase in almost a year, and fruit prices increased 3 percent, the largest rise since July 2000. Those high prices outweighed lower prices for beef, veal, poultry and dairy products.

Elsewhere in the report, clothing prices fell 0.7 percent in January, and new-car prices were down 0.6 percent, the biggest drop since February 1987. But prices for hospital and related services rose 0.9 percent, the biggest increase since December 1999.