Inflation slowed sharply in February as food costs moderated and the price of gasoline, natural gas and other energy products posted big declines.
The Labor Department reported Thursday that its closely watched Consumer Price Index posted a tiny 0.1 percent increase last month after having jumped 0.7 percent in January. The slowdown in price pressures was certain to be welcomed at the Federal Reserve, which has been boosting interest rates since June 2004 to make sure inflation does not get out of control.
The CPI report showed that energy prices dipped by 1.2 percent last month after a big 5 percent increase in January. The moderation reflected a 1 percent drop in gasoline pump prices, a 2.8 percent fall in home heating oil costs and a 4.5 percent drop in the price of natural gas, which was the biggest decline in more than four years.
The gains in food prices also slowed in February to an increase of 0.2 percent, compared to a 0.5 percent jump in January. Vegetable, poultry and dairy prices all fell, helping to offset increases in the price of fruit and pork.
Outside of the volatile energy and food sectors, so-called core inflation was also well-behaved during February, rising by a slight 0.1 percent, after a 0.2 percent gain in January.
The Federal Reserve has been pushing up interest rates since June 2004 to make sure that faster economic growth does not spawn unwanted inflation. Many economists believe that the central bank will push its target for the federal funds rate, the interest that banks charge each other, up by another quarter-point to 4.75 percent at its next meeting on May 27-28.
The Fed has been able to stick to a string of gradual quarter-point increases because inflation pressures outside of energy have remained well contained.
In its latest survey of economic conditions around the country, the Fed said Wednesday that businesses seemed to be coping with high energy prices and rising costs for some construction materials such as cement and lumber.
Outside of food and energy, clothing costs posted a big 1 percent decline last month, the biggest one-month drop in nearly five years.
The cost of new cars edged up a slight 0.1 percent last month although the price of airline tickets shot up by 1.2 percent as airlines continued to boost fares to deal with soaring fuel costs.