Washington, DC, October 18, 2006--The consumer price index decreased a seasonally adjusted 0.5%, the biggest drop since last November, the Labor Department reported Wednesday.
However, excluding food and energy prices, the core rate of inflation increased 0.2% in September, the third straight month with a 0.2% gain.
The drop in the CPI was larger than expected while the rise in core CPI matched forecasts by Wall Street economists surveyed by MarketWatch.
The core CPI is now up 2.9% in the past year, compared with a 2.8% increase in August. This is the highest level since February 1996. The core CPI is up at a 3.0% annual rate so far this year.
The headline CPI is up 2.1% in the past year, down from a 3.8% gain in the 12 months ending in August. This is the smallest increase since March 2004. So far in 2006, the CPI is running at a 3.4% annual rate.
The Federal Open Market Committee will meet next Tuesday and Wednesday to set monetary policy for the next six weeks. Economists expect the central bank to hold rates steady for the third straight meeting.
Energy prices fell 7.2% in September, the biggest drop since November 2005. Gasoline prices fell 13.5% in September, also the biggest decline in ten months. Natural gas prices rose 2.9%.
Commodity prices decreased 1.7% in September. Outside of energy, prices remained stable or inched higher.
Service prices increased 0.4% in the month. Food and beverage prices rose 0.4% in September after a 0.3% gain in the previous month. Housing costs, which represent 40% of the CPI, increased 0.3% after rising 0.2% in August.
Costs of renting a home increased 0.3% for the second straight month.
Medical care prices rose 0.3% as prescription drug prices rose 0.3% and hospital prices rose 0.3%.
Transportation costs fell 4.1% in September as air fares fell 2.3%, the biggest drop since last December. Prices of new vehicles inched down 0.1%.
Apparel prices rose 0.6% in September, while recreation prices were unchanged.
