WASHINGTON -- Consumer prices calmed in November, helped by smaller hikes in energy and food. That means the Federal Reserve probably will continue raising interest rates only gradually to keep inflation under control.
The government's closely watched inflation barometer, the consumer price index, rose 0.2 percent last month, compared with a 0.6 percent spike in October, the Labor Department reported yesterday.
The jump in October reflected surging energy prices, as crude oil costs hit record highs, and soaring food prices related to supply disruptions from a string of hurricanes that ripped through the Southeast.
When energy and food prices are removed, the core inflation rate also rose by 0.2 percent in November for a second month in a row. That suggested other prices remain relatively well-behaved.
The latest inflation readings matched economists' forecasts.
"This validates Fed policy makers' thinking that they are going to continue to raise interest rates at a measured pace into 2005," said Ken Mayland, president of ClearView Economics.
With the economy expanding at a solid pace, inflation has picked up this year.
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 higher energy costs. Still, excluding energy and food prices, core inflation so far this year rose at a rate of 2.3 percent, up from the 1.1 percent rise in core prices registered last year.
In November, energy prices rose 0.2 percent, down from the 4.2 percent leap in October. The moderation was led by a 1.8 percent decline in gasoline prices.
Oil prices have moderated, helping to provide some relief. However, yesterday, light, sweet crude for January delivery climbed $2.10 to settle at $46.28 per barrel on the New York Mercantile Exchange, capping a 14 percent rise in the past week.