Higher prices for gasoline, medical care and some food items contributed to a mild rise in consumer inflation in January. But prices for clothing, cars, lodging and computers all fell, providing shoppers with some bargains.
The consumer price index, a closely watched gauge of inflation, rose 0.2 percent last month after dipping 0.1 percent in December, the Labor Department said Wednesday.
Excluding energy and food prices, which can swing widely from month to month, the “core” rate of inflation increased 0.2 percent in January, up slightly from a 0.1 percent advance the month before.
Even with the modest advances in both overall and core inflation in January, many economists believe consumer prices will remain steady in the months ahead because companies will continue to find it difficult to raise prices even as the economy tries to pull out of recession.
Still, it was the first increase in consumer prices since a 0.4 percent rise in September. Prices declined 0.3 percent in October and 0.1 percent in both November and December. Hopes have grown that the economy is on the verge of recovery from a recession that set in last March, and typically that is accompanied by higher prices.
“The economy does seem to be picking up nicely in the first quarter, but inflation is still negligible,” said economist Bill Cheney of John Hancock Financial Services in Boston.
He added that the Federal Reserve could raise interest rates if it thought inflation threatened the economy, but is unlikely to be worried.
“I think the economy will grow slowly enough, unemployment will remain high enough and productivity growth will be vigorous enough that inflation won’t raise its ugly head anytime soon,” Cheney said.
That means U.S. interest rates, now at 40-year lows after last year’s rate-slashing campaign by the Fed, could stay at current levels at least until midyear, many analysts say.
Energy costs, which had tumbled during the final three months of 2001, rose 0.9 percent in January, while food prices were up 0.3 percent after a flat December reading. Gasoline prices climbed 2.7 percent last month, but that followed big drops of 5.8 percent in December and 10.5 percent in November.
