Consumer prices rose by a modest 0.3 percent in October as falling prices for airfares and cigarettes helped to temper the biggest increase in gasoline costs in six months.
The increase in the Consumer Price Index, the government's most closely watched inflation gauge, came after a 0.2 percent advance in September and matched the 0.3 percent gain in August, the Labor Department reported Tuesday.
The lastest reading on inflation -- both the overall CPI and the core rate -- completely matched analysts' expectations and left economists with little worries about inflation.
"I don't think it's going to change ... (Federal Reserve) policy in any way. The focus is on reviving economic growth and inflation is not going to be a big concern," said Asha Bangalore, economist at Northern Trust Co. in Chicago.
Excluding energy and food prices, which tend to swing widely from month to month, the "core" rate of inflation rose by 0.2 percent in October, up slightly form a 0.1 percent gain.
Even with interest rates at some of the lowest levels seen in decades, Federal Reserve Chairman Alan Greenspan told Congress last week that inflation does not currently pose a danger to the economy, which is struggling to return to full health after being knocked down by last year's recession.
Greenspan noted that many companies, facing the uneven economy and questioning consumers appetite for spending, have limited power to raise prices, helping to keep inflation under control.
The Federal Reserve, wanting to strengthen the economic recovery, cut a key interest rate earlier this month, by a bold half a percentage point, marking the first rate reduction this year and the 12th since January 2001.
Fed policy-makers hope the rate cut will spur more consumer spending and motiviate businesses to ramp-up investment, helping to boost the economic growth.
In the first 10 months of this year, consumer prices rose at an annual rate of 2.7 percent, compared with a 1.6 percent advance for all of last year. Much of the pickup so far this year comes from energy costs, which went up at a rate of 14.2 percent. That's a turnaround from 2001, when energy prices fell at a rate of 13 percent.
In October, energy prices rose 1.9 percent, following a 0.7 percent gain. October's advance was led by a 3.8 percent jump in gasoline prices, marking the biggest increase since April.
The surge in gasoline prices in October partly reflected rising fears of war with Iraq that kept crude-oil prices strong. While a dramatic jump in energy costs could derail the recovery, many economists do not foresee that happening.
Gasoline prices have gone up 29.9 percent so far this year, but are 15.1 percent below their peak level in May 2001, the government said.
Helping to blunt rising energy costs was a 2.4 percent drop in airfares, the largest drop since November 2001. Prices for cigarette and other tobacco products fell by 3.1 percent and computer prices dropped by 1.9 percent, representing other offsetting factors. Clothing prices were flat.
Food prices nudged up 0.1 percent in October, down from a 0.2 percent increase, with prices falling for vegetables, fruit and poultry.
But medical care costs continue to hit the pockets of consumers. Those cost went up 0.6 percent in October and are up 4.8 percent from a year ago.