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U.S. prices edge up
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March 21, 2001: 11:46 a.m. ET
Clothing, food costs lead consumer prices to above-forecast February rise
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NEW YORK (CNNfn) - Increases in clothing and food costs helped push U.S. consumer prices higher in February, the government said Wednesday, but declines in gas and energy prices kept the rise just above forecasts.
The Consumer Price Index, the government's main inflation gauge, rose 0.3 percent last month, the Labor Department reported. Wall Street was looking for a 0.2 percent rise, according to economists surveyed by Briefing.com.
Excluding food and energy prices, which can fluctuate widely, the core CPI also rose 0.3 percent, matching economists' estimates and the previous month's gain.
The report comes a day after the Federal Reserve slashed interest rates by half a percentage point, disappointing investors who had been clamoring for a more aggressive three-quarters percentage point cut and prompting a selloff that sent stock markets tumbling.
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This is not going to stand in the way of further Fed easing.
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UBS Warburg's Jim O'Sullivan |
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The Fed also signaled that more rate cuts may be needed to prevent further economic weakness. The reduction, coming after two half-point cuts earlier this year, took the rate that banks charge each other for overnight loans to 5 percent from 5.50 percent.
Analysts said the CPI report was unlikely to stop the Fed from cutting rates again if the central bank sees the need.
"The Fed is not going to be troubled by a small miss (in the CPI). I don't think it's that big an issue," Charles Lieberman, chief economist at Advisors Financial, told CNNfn's Before Hours Wednesday. "They're concerned that a falling stock market could hurt consumers sufficiently to curtail spending. That could be a problem."
"Inflation is obviously a little bit higher than expected," Jim O'Sullivan, an economist with UBS Warburg, told Reuters news service Wednesday. "Food and apparel were up. This is not going to stand in the way of further Fed easing."
On Wall Street, stocks were mixed after the report. The Dow Jones industrial average fell about 1 percent while the tech-heavy Nasdaq composite index rose modestly in midday trading.
 Food prices jumped 0.5 percent last month after a 0.3 percent increase in January, the department said, as fruit and vegetable prices jumped 2.6 percent after falling 2.7 percent in January. Clothing prices rose 0.8 percent in February after three months of declines.
Prescription drug prices increased 0.8 percent while airline fares rose 1.3 percent, reflecting rising fuel costs.
After shooting up a whopping 3.9 percent in January, energy prices fell in February by 0.2 percent, the best showing since August.
Natural gas prices, which posted a record increase of 17.4 percent in January, declined 2.4 percent in February. And gasoline prices increased 1.2 percent, their first increase since September.
Housing prices rose 0.2 percent compared with a 1 percent increase in January. Tobacco prices rose 1 percent. 
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