NEW YORK (CNNMoney.com) -- Consumer prices for everything other than food and energy are rising, but at a rate so sluggish, it's the smallest price increase on record, the government said Wednesday.
The Consumer Price Index, a key measure of inflation, increased 1.2% over the past 12 months ending in October, the Bureau of Labor Statistics said.
But after stripping out volatile food and energy prices, the more closely watched core CPI rose 0.6% on an annual basis -- the smallest price increase since the government started recording the data in 1957.
Falling prices for new and used vehicles, apparel, recreation and tobacco kept the index low.
Still, it may feel to consumers like prices are rising: Shelter and medical care costs rose, and gasoline prices are up 9.5% over last year.
Consumers may also be noticing their grocery bills going up, but only slightly -- around 1.4% over last year.
The overall index remained low, even as commodity prices have surged in the last month -- some even to record highs. Cotton, for example, recently traded at its highest price in 140 years of trading.
Businesses just haven't started passing those costs on to consumers yet, said Jennifer Lee, senior economist with BMO Capital Markets.
"Businesses and producers are swallowing the increases we see in commodities," Lee said. "Consumers still have a lot of power in their hands."
A rate of inflation around 1% is considered sluggish, and raises concerns of deflation -- or falling prices.
While that may sound good to consumers who are still grappling with 9.6% unemployment, falling prices often also mean falling wages, as businesses respond to declines by cutting output and jobs.
That's why the Federal Reserve is trying to raise inflation slowly, around its target of about 2% per year. Two weeks ago, the central bank announced a plan to stimulate the economy by lowering interest rates -- a move that it hopes will encourage both consumers and businesses to spend more.
While that plan -- known as quantitative easing -- has recently come under fire from several economists, Wednesday's latest inflation data is likely to lend more support to the Fed's argument that the economy is teetering on the brink of deflation, and needs a jumpstart.
Defending the Fed's move in a speech Wednesday, Eric Rosengren, president of the Federal Reserve Bank of Boston cited low inflation as cause for concern.
"With unemployment so high and inflation unusually low, most models indicate that further monetary accommodation is warranted," he said.
Month by month: CPI rose 0.2% in October, on a monthly basis. Economists surveyed by Briefing.com had expected a 0.3% uptick. The increase was largely due to an increase in energy prices, the report said.
Berkshire Hathaway CEO Warren Buffett released his 50th annual letter to shareholders. The Oracle of Omaha thinks the next 50 years will be great and knows who will replace him. More
Potential presidential candidate says that improvement in unemployment rate is due to millions of jobless not being counted. More
With the death of Leonard Nimoy, the actor who played Star Trek's Spock, we remember his character's legacy: The technology we use every day. More
A social media frenzy about the color of a dress is bringing fame and fortune for one small British fashion company. More