U.S. consumer prices held steady last month as plunging energy prices offset increases in the cost of food, homes and lodging, the government said on Tuesday in a report that showed little change in underlying inflation trends.

The consumer price index (search), the most widely used gauge of U.S. inflation, was unchanged in October, the Labor Department said. The so-called core index, which strips out sometimes volatile food and energy prices, rose 0.2 percent.

Markets largely shrugged off the data, which came in close to expectations. Economists had expected both the overall CPI and the core index to rise 0.1 percent.

Analysts said the report showed a lack of inflation that meant the Federal Reserve (search) could afford to keep overnight borrowing costs at a 1958 low of 1 percent for some time to try to spur jobs creation.

"Continued low inflation, which is just what Dr. Greenspan ordered," said Stuart Hoffman of PNC Financial Services Group in Pittsburgh. "It tells me that the Federal Reserve will practice patience and these are precisely the kind of low inflation numbers that will reinforce their patience."

Energy prices plunged 3.9 percent in October, reversing course after big gains in the prior two months.

Food prices rose a sharp 0.6 percent, reflecting the biggest advance in beef prices in nearly 25 years. A ban on imports of Canadian beef, put in place after Canada discovered one case of mad cow disease earlier this year, have driven prices higher, analysts say.

The 0.2 percent gain in the core CPI marked a bit of an acceleration from September, when core prices inched up just 0.1 percent.

The department said the biggest factor behind the pickup in core prices was a rise in "shelter" costs, including a 2.3 percent spike in lodging and a 0.3 percent gain in the cost of owning a home.

The 12-month change in the core index ticked up to 1.3 percent from the 1.2 percent reached in September, which was the slowest rate in over 37-1/2 years.

The low core inflation rate reflects a slowdown in price gains that appeared to have bottomed out earlier this year.

Over the past three months, the annual rate of increase in the core CPI is a quicker 1.5 percent. The figure had fallen to just 0.4 percent in the three months through April.

Federal Reserve officials have said they are concerned over the potential for already low inflation to move undesirably lower, which could raise the risk of deflation, a persistent decline in consumer prices that could harm the economy.

While signs of a marked quickening in the pace of economic recovery have helped ease those worries, officials have said a relatively high level of unemployment and excess productive capacity mean it is too soon to say the risk of a further inflation slowdown has been eliminated.

A separate report on Tuesday showed U.S. retail sales slipped in the latest week as shoppers retrenched before next week's traditional launch of the holiday shopping season.

Sales fell 0.8 percent in the week ended Nov. 15, the Bank of Tokyo-Mitsubishi and UBS said in a joint report, compared with a 1.2 percent pop in the preceding week. Compared with the previous year, sales for the week were up 6.2 percent.

Consumer spending, which accounts for two-thirds of the U.S. economy's thrust, has cooled a bit since a tax-cut inspired burst in July and August. But analysts expect a strong holiday sales season compared with last year's disappointing performance.