NEW YORK (CNN/Money) -
Consumer prices rose just a bit more than expected in October -- after soaring at the fastest pace in 25 years the previous month -- in a report that helped calm Wall Street worries about inflation.
Still, prices excluding food and energy posted their biggest gain since March, according to a government report Wednesday.
The Consumer Price Index, the government's main inflation gauge, posted a 0.2 percent gain in October, following a jump of 1.2 percent in September -- the biggest increase since March 1980 -- as gas prices soared following Hurricane Katrina, the Labor Department reported.
Economists surveyed by Briefing.com had forecast a flat reading for October.
Gasoline prices fell 4.5 percent, pulling overall energy prices down 0.2 percent last month, following a 12 percent jump in September.
But while gas retreated, other energy prices rose, notably natural gas, which shot up 45 percent. Food prices climbed 0.3 percent, which partly offset the decline in energy prices.
The closely watched core CPI, which excludes often-volatile food and energy prices, posted a 0.2 percent rise, in line with forecasts, and a shade higher than the 0.1 percent gain posted in each of the last five months.
"It's a little disappointing to see core up that much," said Anthony Chan, senior economist for JPMorgan Asset Management. "I was hoping for surprise on the downside for core as we got in the PPI (Producer Price Index) yesterday."
The PPI, which measures prices on wholesale level, showed a bigger rise in overall prices, up 0.7 percent for October, but a 0.3 percent decline in the core reading.
Some of the upward pressure on core prices came from sectors that have seen the strongest price gains in recent years.
Medical costs rose 0.5 percent while housing prices jumped 0.9 percent. The housing number includes things like financing costs, which have risen due to higher mortgage rates, and utility costs, which are rising due to higher prices for natural gas and heating oil.
Even with the pickup in core prices, the core CPI is up a modest 2.1 percent over the last 12 months, while the overall CPI is up more than twice that, with a 4.3 percent rise.
The overall increase in prices outpaced the 3.3 percent gain in the average hourly wage over the same period, according to a separate Labor Department report, meaning that most workers lost ground to inflation over the last year.
Still, the modest rise in the core reading should be enough to allow the Federal Reserve to keep raising rates at it's "measured" quarter-percentage point pace, JPMorgan's Chan said.
"At 2.1 percent, we are teetering slightly above the upper end of the range the Fed would like to see," he said. Economists say Alan Greenspan and other Fed governors have an informal target range of 1 to 2 percent for core inflation.
On Wall Street, Treasury bond prices rose after the report, cutting the yield on the 10-year treasury to 4.53 percent from 4.56 percent earlier, a sign the bond market believes inflation is contained.
Stocks edged higher in early trading.
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