WASHINGTON – Rising food costs and higher rents offset a drop in gas prices last month, leaving consumer inflation all but flat in October.
The consumer price index rose a seasonally adjusted 0.1 percent in October, the Labor Department said Thursday. That's down from sharp gains of 0.6 percent in the previous two months, which were driven by a spike in gas prices that has since receded.
Gas prices fell 0.6 percent last month. Food prices rose 0.2 percent, pushed higher by steep increases in milk and cheese costs.
Excluding volatile food and gas, prices increased 0.2 percent last month.
The cost of shelter, which includes rents, rose 0.3 percent, the most in more than four years. Rental vacancies have declined in recent months, pushing rents higher. Hotel costs also increased last month.
Clothes and airline fares also rose last month. The price of new and used cars fell.
Over the past 12 months, overall consumer prices have increased just 2.2 percent. That's only slightly above the Federal Reserve's inflation target of 2 percent.
"Inflationary pressures at the consumer level are modest," Steven Wood, an economist at Insight Economics, said in a note to clients.
Mild inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation also makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.
Minutes of the Fed's October meeting released Wednesday suggested policymakers could launch a new bond-buying program in December to spur job growth. The goal of the purchases would be to lower long-term interest rates to encourage more borrowing and spending.
Gas prices rose sharply over the summer and into September, but have since come down. The average price for a gallon of gas nationwide was $3.44 on Wednesday, about 35 cents below last month's level.
The price of milk increased 0.9 percent last month, the most in more than a year. Cheese costs jumped 1 percent. Prices for bread, cereals, meat and chicken also increased.
The increases suggest that this summer's drought is starting to drive up prices at supermarkets and grocery stores. The drought damaged corn, soybeans and other crops. Corn and soybeans are used in animal feed, which pushes up the price of beef, chicken and pork.
Corn is also used in many products found throughout the supermarket, from cereals to soft drinks to cosmetics.