Consumer prices rose by a mild 0.2 percent in November as costs for gasoline and food products calmed down after posting sharp increases the month before.
The newest snapshot of the nation’s inflation climate, released by the Labor Department on Friday, validates the stance of Federal Reserve Chairman Alan Greenspan and his colleagues that interest rates can go up at a gradual pace to keep inflation at bay.
Last month’s 0.2 percent increase in the consumer price index, the government’s closely watched inflation barometer, marks an improvement from the 0.6 percent jump in October. That rise was stoked by surging energy as crude oil costs hit record highs and soaring food prices reflecting supply disruptions related to a string of hurricanes that ripped through the Southeast.
Excluding energy and food prices, which can swing widely from month to month, “core” prices also rose by 0.2 percent in November for the second month in a row.
The latest inflation readings matched economists’ forecasts.
Federal Reserve policy-makers, wanting to keep inflation from becoming a danger to the economy, boosted short-term interest on Tuesday by one-quarter percentage point, the fifth increase this year. That action left a key rate at 2 1/4 percent, more than double the 46-year low of 1 percent where it stood before the Fed embarked on its string of rate increases in June.
Looking ahead, the Fed maintained its stance that future rate increases would be gradual. Of the pricing climate, Fed policy-makers said: “inflation and longer-term inflation expectations remain well contained.”
Wholesale prices in recent months have been outpacing consumer prices. In October, wholesale prices spiked up by 1.7 percent, the largest rise in more than 14 years. In November, wholesale prices went up by a strong 0.5 percent. Some companies have found it difficult to pass along to consumers all of the increases in their costs, especially for raw materials, economists say.
Still, with the economy expanding at a solid pace, inflation is picking up.
In the first 11 months of 2004, consumer prices are increasing at an annual rate of 3.7 percent, compared with a 1.9 percent rise for all of 2003. That acceleration mostly reflects more expensive energy prices.
Excluding energy and food prices, “core” inflation so far this year rose at a more moderate rate of 2.3 percent. Nevertheless, that’s up from the 1.1 percent rise in core prices registered last year.
In November, energy prices rose by just 0.2 percent, way down from the 4.2 percent leap in October. The moderation was led by a 1.8 percent decline in gasoline prices.
Oil prices, which hit a record high of just over $55 a barrel in late October, have moderated, helping to provide some price relief. Oil prices are now hovering at more than $44 a barrel.
Food prices, meanwhile, increased 0.2 percent in November, down from a 0.6 percent advance. Falling prices for beef and veal, poultry and dairy products blunted rising prices for fruits, vegetables and pork.
Elsewhere in the report: clothing prices nudged up 0.1 percent in November. Medical care costs rose 0.2 percent in November. New automobile prices went up 0.7 percent and airfares increased 1 percent.