Lower light bills curb gasoline's boost to CPI

Fri Apr 13, 2012 9:00am EDT
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By Jason Lange

WASHINGTON (Reuters) - Consumer prices rose modestly in March as falling electricity costs countered higher gasoline prices, boosting the view the U.S. Federal Reserve has room to provide more support for the economy if needed.

The Labor Department said on Friday its Consumer Price Index increased 0.3 percent after advancing 0.4 percent in February. That was in line with economists' expectations.

Outside the volatile food and energy category, inflation pressures appeared muted. Core CPI edged up 0.2 percent after gaining 0.1 percent in February.

The U.S. Federal Reserve has said it will probably hold interest rates super low until at least late 2014 to help the economy, which is limping back from the 2007-2009 recession. The central bank is charged with keeping inflation low while promoting full employment. The next policy meeting is scheduled for April 24-25.

Amid recent signs of weakness in the labor market, investors are betting the Fed could unleash further monetary stimulus to boost growth, although comments by Fed officials this week suggested the central bank is on hold as it waits to see whether the recovery gains traction.

"I think the Fed has made it blatantly clear that inflation is not their first concern. They're more interested in growth and robust labor numbers," said Boris Schlossberg, who heads research at GFT Forex in Jersey City.

Government debt prices were steady at higher levels following the CPI data. The dollar pared gains against the euro. Stock index futures fell as concerns over Spain's rising borrowing costs resurfaced and after disappointing Chinese growth data.

Last month, overall inflation was pushed up by gasoline prices, which rose 1.7 percent. That was a much more mild increase than the 6 percent gain in February.   Continued...

A man holds a sign advertising cash paid for gold and other precious metals in New York City, November 14, 2011. REUTERS/Mike Segar