Consumer Prices Up 0.4 Percent

Consumer prices gained momentum in February, rising by 0.4 percent, the biggest increase in four months. It was a fresh sign that inflation is picking up.

The increase in the consumer price index, the government's most closely watched inflation barometer, came after prices nudged up by just 0.1 percent in January, the Labor Department (search) reported Wednesday.

The newest snapshot of the inflation climate underscored the Federal Reserve's (search) resolve to continue to lift interest rates in an effort to prevent high energy prices from stoking broader inflation.

Excluding energy and food prices, which can swing widely from month to month, "core" prices rose by 0.3 percent in February. That was up from a 0.2 percent increase in January and represented the largest increase since September.

Although sharp increases in energy costs — including gasoline — led the way in February, many other prices, including airfares, medical care, and for education, also went up.

Before the release of the CPI report, economists were forecasting a 0.3 percent rise in overall consumer prices and a 0.2 percent advance in core prices.

"Inflation is elevated but there is no cause for panic," said Ken Mayland, president of ClearView Economics (search). "The Fed saw all this coming and it put us on a course of raising interest rates last year. The situation is well in control."

The consumer prices report comes one day after the Federal Reserve, expressing concerns about a pickup in inflation, boosted short-term interest rates by one-quarter percentage point to 2.75 percent, the seventh, quarter-point increase since the Fed's rate-raising campaign began last June.

"Pressures on inflation have picked up in recent months," Fed policy-makers said. They also noted that pricing power — the ability of companies to raise prices to customers — is "more evident."

So far, though, rising energy prices have "not notably fed through to core consumer prices," Fed policy-makers said.

The Fed's overall assessment of the country's inflation situation, however, prompted some economists to predict that the Fed's credit tightening could last longer— possibly into 2006— than they previously had anticipated.

Rising energy prices helped to stoke the overall rise in consumer prices in February.

Energy prices jumped by 2 percent last month, compared with a 1.1 percent drop posted in January.

Gasoline prices in February rose 3.2 percent, natural gas prices were up 2.5 percent and fuel oil costs increased 2.4 percent.

Oil prices, which set a new record high last week, are currently hovering above $55 a barrel.

Food prices, meanwhile, inched up by just 0.1 percent for the second month in a row.

Elsewhere in February's report: airfare prices increased 1.5 percent; medical care costs rose 0.6 percent, and education prices went up 0.5 percent.

Rising inflation can strain the family budget. After adjusting for inflation, weekly earnings of nonsupervisory workers dropped 0.4 percent in February, compared with a 0.2 percent increase in January, the Labor Department said in a separate report.