Consumer prices edge higher

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NEW YORK (CNNMoney.com) -- Consumers, hit by rising energy prices, paid slightly more for goods and services in March. But the overall inflation gain was in line with Wall Street expectations.

The Consumer Price Index, the government's key inflation measure, rose 0.3%, compared to February, when prices were unchanged. The gain matched the forecasts of economists surveyed by Briefing.com. The price of energy jumped 1.9% percent in the month.

The more-closely watched core CPI reading, which strips out volatile food and energy costs, was up 0.2% in March, after being unchanged in February. That also matched economists' forecasts.

On Tuesday, the government measure of inflation at the wholesale level, the Producer Price Index, came in much higher than forecasts. That reading raised fears that higher food and energy prices could stop the Federal Reserve from being as aggressive in its efforts to spur economic growth.

But the fact that the CPI report showed consumer inflation as roughly in line with forecasts should assure investors who are hoping for further interest rate cuts from the central bank.

The report showed a sharp 1.3% drop in clothing prices, with the declines seen across all categories of those goods, suggesting that weak sales are prompting retailers in the sector to cut prices. New cars and truck prices also fell, as automakers respond to weaker sales.

And some areas that have seen strong gains over the last year posted only modest gains in March. Health care prices rose 0.1%. Food and beverage prices gained 0.2%, as a jump in the price of fresh vegetables, baked goods, sugar and sweets were balanced by declines in prices for dairy and related products.

Over the last year, the CPI is up 4%, the same year-over-year rise seen in the February reading. And the core CPI is up 2.4% over the last 12 months, a bit more than the 2.3% gain on that basis in February, but down from the 2.5% year-over-year rise in January. Over the first quarter of the year, the core CPI is up at an annual rate of 2%, at the upper end of the so-called "comfort zone" of a 1 to 2% rise in that reading that the Fed is believed to want to see.

The Fed's next meeting is April 29-30. Investors buying fed funds futures on the Chicago Board of Trade are pricing in a 100% chance of another quarter-point rate cut at that time, but only a 28% chance of a half-point cut. That is unchanged from the close of trading Monday ahead of this CPI report.