March Consumer Prices Up Mere 0.2% : Economy: The increase, the smallest this year, indicates Fed’s seven interest rate hikes are curbing inflation.

Tumbling prices in March for fruits, vegetables and energy held consumer prices to their smallest increase so far this year, the government said Wednesday, suggesting that the Federal Reserve Board is winning its yearlong fight to contain inflation.

The Labor Department said the consumer price index rose 0.2% last month after rising 0.3% in January and February. Higher prices for airline tickets and used cars led the advance, the smallest since December.

The rise was less than expected and follows Tuesday’s surprise news that prices at the producer level were unchanged last month.

Economists said the Fed’s seven interest rate hikes since early 1994 are slowing the economy and curbing inflation and that the central bank may not need to boost rates further.

“We are getting what the doctor ordered: a ‘soft landing’ where inflation is under control and economic growth is modest,” said Sung Won Sohn of Norwest Corp. “It’s the best of both worlds.”

Excluding volatile food and energy costs, the “core” CPI gained 0.3%; it rose at the same rate in February.

Financial markets largely shrugged off the news. Stock and bond prices rose slightly, with the Dow Jones industrial average closing up 10.73 points at 4,197.81, but the strength came from a surprising takeover offer for Chrysler Corp. rather than the CPI report. The dollar traded in a narrow band.

Despite the modest rise in prices last month, inflation has crept up in recent months, with the CPI rising at a 3.2% annual rate over the last three months. In 1994, it rose 2.7%, the same as in 1993.

The core rate rose at a more rapid 4.1% annual rate in the first quarter. It rose 2.6% in 1994.

In a separate report, the Labor Department said workers’ average weekly earnings, after adjusting for inflation, fell 0.1% in March, compared to a drop of 1.2% in February.

The Clinton Administration hailed the recent batch of economic data.

“All the fundamentals are strong. The growth rate is about where we want it with virtually no signs of inflation,” Commerce Secretary Ronald H. Brown said on CNBC.

Fed policy-makers meet again May 23. Economists predict the central bankers will keep interest rates steady in the face of evidence that the economy is slowing and inflation is in check.

The March CPI showed that food prices were steady after rising 0.3% in February. Fresh fruit and vegetable prices unexpectedly tumbled last month, sliding 2.8%. Tomato prices fell 19.4%, the largest drop in a year.

Economists had expected that the storms and flooding that struck California last month would fuel a rise in fruit and vegetable prices. The floods caused hundreds of millions of dollars in crop losses.

Energy prices fell 0.5% last month after falling 0.1% in February. Gasoline prices fell 0.3% and natural gas prices slid 1.4%. Heating oil prices rose 0.1%.

Clothing prices were flat after falling 0.6% in February. Prices of new cars were steady after rising 0.3%. But prices of used cars jumped 1.7% after shooting up 2.7% in February. Airline fares rose 3.4%, and health care costs rose a moderate 0.3%.

Separately, the Federal Reserve Bank of Atlanta said its national production index fell in March to its lowest level since July, 1993, suggesting U.S. manufacturing activity may be slowing.

Also, the regional Fed bank said its index that tracks prices paid for raw materials rose slightly, while its index of prices received for finished products fell. That suggests manufacturers may not be able to pass on cost increases to consumers.