U.S. consumer prices rose in March for the third straight month, driven by soaring energy costs, the government said on Tuesday in a report that may help wedge open the door at the inflation-wary Federal Reserve for interest rate rises later in the year.

However, the rise in prices was below Wall Street expectations and led most analysts to emphasize that inflation is not a looming threat for the central bank, meaning increases in borrowing costs may lie further out in 2002.

The Consumer Price Index (CPI), the most widely used inflation gauge, gained 0.3 percent last month after rising 0.2 percent in both January and February, the Labor Department said.

March's increase was below economists' predictions of a 0.5 percent rise and will likely lead the Fed to wait until at least its June meeting -- if not longer -- to raise rates rather than moving at its next policymaking meeting in May.

Excluding volatile food and energy prices, the so-called core CPI edged up just 0.1 percent, coming in below the 0.2 percent increase economists in a Reuters poll had forecast.

"Inflation numbers are a little better than people feared. It does show that we are beginning to see the turn though in inflation," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis.

In the report, the Labor Department said energy prices rose 3.8 percent, which was the biggest increase since a 3.9 percent rise since May of last year. Food prices, another key component in the index, rose a slight 0.2 percent last month after gaining the same amount in February.

Economists predict that any pickup in consumer prices will be closely watched by the Fed, which is widely expected this year to start bumping up the federal funds rate that now stands at a 40-year low of 1.75 percent after 11 cuts last year.

The central bank already signaled rate increases are on the horizon when, last month, it dropped a 15-month-old warning that weakness posed the biggest threat to the economy. The Fed instead said risks were now more evenly balanced between inflation and weakness, a first step toward unwinding some of the rate cuts.