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NEW YORK (CNN/Money) -
Prices paid by consumers rose at a steady clip last month, the government said Thursday in a report showing weaker inflationary pressures than Wall Street had expected in one of the more closely watched readings.
The report was sure to get extra attention because of greater uncertainty than normal as to what the Federal Reserve will do with interest rates at its meeting Tuesday.
The Consumer Price Index (CPI) climbed 0.5 percent in August, the same increase posted in July, the Labor Department reported. The reading was in line with the average forecast of economists surveyed by Briefing.com.
The closely watched core CPI, which excludes often volatile food and energy prices, edged up 0.1 percent in August, the same as the increase the previous month. Economists had forecast a 0.3 percent rise in prices outside of food and energy.
The data in the report was collected before Hurricane Katrina hit the Gulf Coast, causing a spike in gasoline prices in the month's final days.
Even without the jump in gasoline prices to record levels, the August report showed a 5.0 percent rise in energy prices overall, with gasoline showing an 8.3 percent rise, the biggest jump in gas prices since February 2003, in advance of the U.S. invasion of Iraq the next month.
But inflationary pressures were mostly tame in other sectors. Prices were unchanged in the medical sector, one of the areas which has seen the highest price rises outside of energy during the last year.
Prices for apparel rose 1 percent, but that followed two months of decline, and clothing prices are still below year-ago levels, the department said in its report.
For the past 12 months, overall prices have risen 3.6 percent, while core CPI has increased 2.1 percent during that time.
Some economists argue that with inflationary pressures in check, the Fed could afford to pause on the "measured" quarter-percentage point interest rate hikes it has imposed at its last 10 meetings.
Those economists say the central bankers should wait to assess the impact of Katrina on the economy. Others argue another quarter-point increase is necessary to keep prices in check given the large jump in energy prices following the storm.
For more on whether Hurricane Katrina will lead to higher prices, click here.
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