CPI: Inflation rate stays uncomfortably low

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Consumer prices are up slightly over last year driven by climbing food and energy costs, but still lower than policymakers would like.

The Consumer Price Index, a key measure of inflation, rose 1.1% over the last 12 months ending in September, the Bureau of Labor Statistics said Friday, unchanged from the previous month. Any number above zero means prices are rising, but a rate around 1% is considered slow growth.

Shortly ahead of the report, Federal Reserve Chairman Ben Bernanke gave a speech on the "low inflation environment," saying inflation trends will likely "remain subdued for some time."

"Inflation is running at rates that are too low" Bernanke warned. "The risk of deflation is higher than desirable."

The possibility of rising inflation had also been a concern amid speculation of further easing of U.S. monetary policy. But the low CPI reading dissuaded some of those fears, lending more support to predictions that the Fed will buy more long-term Treasurys in November, said Mark Vitner, senior economist with Wells Fargo.

"There really isn't a whole lot of reason to worry about inflation right now, and that gives the Fed a free hand to do whatever they need to do," Vitner said.

The CPI report was also closely watched by policymakers this month, because the government used the data to determine Social Security beneficiaries will not get a cost of living increase in 2011.

Prices remain sluggish

The so-called core CPI, which strips out volatile food and energy prices, rose at a 0.8% annual rate in September, down slightly from 0.9% in August.

Food prices posted their largest increase since October 2008, rising 1.4% during the year. Energy prices rose 3.8%.

For September, CPI rose just 0.1% month over month, lower than expectations. Prices were expected to have increased 0.2% in September, after climbing 0.3% the previous month, according to consensus estimates from Briefing.com.

Core CPI for the month was flat. Economists had expected it to have inched up 0.1%, after rising the same amount in August.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 18,010.68 -115.44 -0.64%
Nasdaq 5,070.03 -27.95 -0.55%
S&P 500 2,107.39 -13.40 -0.63%
Treasuries 2.09 -0.04 -1.64%
Data as of 9:03am ET
Company Price Change % Change
Bank of America Corp... 16.50 -0.17 -1.02%
Apple Inc 130.28 -1.50 -1.14%
Pfizer Inc 34.75 0.31 0.90%
Intel Corp 34.46 0.45 1.32%
General Electric Co 27.27 -0.36 -1.30%
Data as of May 29
Sponsors

Sections

Ed Gilligan spent his entire 35-year career with American Express, starting as an intern ad rising to one of the highest executive posts at the bank. More

The U.S. economy lost ground in the first quarter, but it is already showing signs of life. More

Brit Morin is a DIY queen. Her startup Brit + Co. inspires women and girls to be creative -- and just raised $23 million in funding. More