WASHINGTON – U.S. consumer prices jumped 0.5 percent last month as gasoline prices soared, but prices outside of energy barely budged, the government said on Thursday in a report largely unaffected by Hurricane Katrina (search).
The so-called core Consumer Price Index (search), which strips out volatile food and energy costs, moved up just 0.1 percent in August, the Labor Department said.
Wall Street (search) economists had expected overall consumer prices to climb 0.6 percent, with the core index up 0.2 percent.
The lower-than-expected core inflation reading provided the latest sign that soaring energy prices had yet to spill over into other areas, news that should comfort Federal Reserve policy-makers when they gather on Tuesday to set interest rates.
Energy prices soared 5 percent in August, the biggest one-month gain since March 2003 - a reminder that prices were already climbing before Katrina struck the Gulf Coast on Aug. 29. While the department collects prices throughout the month, it said over 90 percent of the prices were gathered before the storm hit.
Gasoline prices climbed 8.3 percent in August, their biggest gain since February 2003, while fuel oil costs increased 4.1 percent and natural gas prices gained 2.7 percent.
The U.S. Energy Department has said the average nationwide retail gasoline price hit a record high of $3.07 a gallon in the immediate aftermath of the storm, but has come off a bit from that peak.
Food prices were unchanged last month, but economists have said they expect those costs to rise as imports hit a bottleneck due to the damage to key Gulf Coast ports.
The department's measure of housing costs, absent prices for utilities and furniture, held steady, as hotel prices turned down. But apparel prices shot up 1 percent.
The cost of medical care, which had been rising sharply, was unchanged.
Over the past 12 months, core inflation has moved up just 2.1 percent, suggesting that underlying price pressures may have abated a bit in recent months. That figure stood at 2.4 percent as recently as February.
Fed officials will carefully parse the consumer price report when they meet on Tuesday. Some economists think the Fed might pause in a more than year-long campaign to push interest rates higher to buy time to better assess the impact of Hurricane Katrina.
However, most analysts think the central bank will push overnight borrowing costs up by a quarter-percentage point to 3.75 percent, the 11th consecutive hike.