Consumer Price Index Up 0.4 Pct. in Feb.

"U.S. Economy"

03/16/2007

WASHINGTON (AP) - Consumer inflation spurted higher in February, reflecting rising costs for gasoline and big jumps for food as the impact of adverse winter weather on citrus crops began to be felt.

The Labor Department reported Friday that its Consumer Price Index rose by 0.4 percent last month, double the January increase and the largest advance since a similar increase in December.

The increase was larger than the 0.3 percent gain that had been forecast although excluding volatile food and energy prices, inflation was better-behaved, rising by just 0.2 percent, exactly what economists had been expecting.

Federal Reserve policymakers meet next Tuesday and Wednesday with the wide expectation that they will leave interest rates unchanged even though the economy has slowed significantly under the impact of a steep slump in housing and troubles in autos and other parts of manufacturing.

While the Fed would normally be expected to ride to the rescue of a faltering economy by cutting rates, the stubbornly high inflation readings are expected to boost the arguments of Fed officials that the biggest threat to the economy remains the risk of higher inflation, not weaker growth.

The overall CPI reading was slightly bigger than expected, but it was still more moderate than a huge 1.3 percent surge in wholesale prices for February, a jump that was more than double what economists had been expecting.

At the consumer level, price pressures were led by higher energy costs, which were up 0.9 percent last month after having fallen by 1.5 percent in January.

Gasoline costs rose by 0.3 percent with economists forecasting even bigger advances as the spring driving season gets under way. The latest Lundberg Survey found that the nationwide average for gasoline has risen by 20 cents per gallon in just the past two months.