Consumer Prices Rise Slightly in January

Consumer prices rose a scant 0.1% last month following four consecutive months of increases triple that size, as both food and transportation costs fell, the Labor Department reported Wednesday.

Grocery store prices declined 0.6%, as the cost of most food items fell. But beverage and restaurant meal prices rose.

The drop in transportation costs was the result of a 3.2% fall in airline fares, which was partly the consequence of the lapsing of the federal tax on plane tickets. Gasoline prices rose an additional 0.7% following a 2.5% jump in December. Pump prices last month were 15.6% higher than they were when they turned upward 14 months earlier.

The so-called core portion of the consumer price index, which excludes volatile food and energy prices, also rose 0.1% last month. Over the last 12 months, the core CPI has risen 2.5%, matching the figure for the 12 months ended December 1994 for the smallest such increase in nearly 31 years.

The near absence of consumer price inflation suggests that the Federal Reserve Board is unlikely to raise short-term interest rates any time soon, analysts said.

“The recent 10% decline in crude oil prices hasn’t even kicked in yet,” said Mickey Levy, chief financial economist at NationsBank in New York. “That should be a favorable factor over the next few months.”

Levy said the Fed’s “low-inflation monetary policy . . . inhibits businesses’ flexibility to raise prices and forces them to restrain operating costs.” So long as the Fed follows such a policy, “low inflation and low unemployment rates are not inconsistent with each other.”

Despite the noninflationary news, stocks and bonds closed lower, with the Dow Jones industrial average losing nearly 50 points.

Among the other parts of the consumer price index, housing costs rose 0.3%, compared with 0.2% the month before, while medical care costs increased 0.2% for the second month in a row and entertainment prices were unchanged after rising 0.3% in December.

New-car prices dipped 0.2% last month and were up 1.3% over the last 12 months.

One of the few parts of the CPI that showed a sizable increase was lodging rented while out of town. Hotel and motel prices increased 1.6% last month.

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Consumer Prices

Monthly percentage change, seasonally adjusted:

January: +0.1%

Source: Bureau of Labor Statistics