Consumer prices post meager rise

Increasing food costs led April consumer prices higher by 0.2 percent, less than forecast, offsetting a basically flat reading for energy. (Mark Lennihan/Associated Press)

WASHINGTON - US consumer prices rose less than forecast in April, reflecting cheaper costs for cars and hotel rooms that offset the biggest jump in food in 18 years.

The consumer price index increased 0.2 percent after a 0.3 percent gain in March, the Labor Department said yesterday. So-called core prices, which exclude food and energy costs, climbed 0.1 percent, compared with 0.2 percent.

Bonds rallied after the report, which may be welcomed by Federal Reserve officials after they warned two weeks ago of "high" uncertainty in the outlook for prices. The central bank has for most of the past year predicted that a slowing economy would hold down prices.

"The inflation numbers have been so ugly that you need to see two or three months strung together before anyone at the Fed is going to relax," said Christopher Low, chief economist at FTN Financial in New York. "But it's a start. The report is significantly better than expected and you have to start somewhere."

Economists forecast that the consumer price index would increase 0.3 percent, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from increases of 0.1 to 0.7 percent. Excluding food and energy costs, prices were projected to rise 0.2 percent.

"Bottom line, this is a good report," said Brian Bethune, director of financial economics at Global Insight Inc. in Lexington, Mass. "It basically says there is no reason one way or the other to move interest rates, but if the Fed had to later in the summer, definitely they would have the opportunity."

Prices rose 3.9 percent in the 12 months ended in April, down from a 4 percent year-over-year gain in March. The core rate increased 2.3 percent from April 2007, after rising 2.4 percent in the 12 months ended in March.