CPI Up 0.4%

Washington, DC, March 16, 2007--Keeping pressure on the Fed, U.S. consumer prices increased 0.4% in February, led by higher prices for food, energy, shelter and tobacco, the Labor Department reported Friday.

Core prices, excluding food and energy, increased 0.2% in February.

The 0.4% gain in the consumer price index was a tenth of a percentage point higher than expected by economists. The core CPI came in as expected.

The CPI rose 0.2% in January, and core prices rose 0.3%.

Food prices jumped for the second straight month, rising 0.8%, the largest gain in nearly two years. Prices for fresh fruit rose 5.7%, the most in 19 years. Fresh vegetable prices also rose 5.7%.

Cold weather in California has damaged some crops, sending prices higher. Corn - a primary input for many food items - has also increased in price as ethanol production takes more of the crop.

In the past three months, food prices have risen at a 6.1% annual rate.

Energy prices rose 0.9% in the month, including a 0.3% rise in gasoline prices. Natural gas prices advanced 5%, the biggest increase since October 2005, after Hurricane Katrina took much of the supply offline.

In the past year, consumer prices are up 2.4%, while core prices are up 2.7%, unchanged from last month's 12-month increase. Core prices have risen at an annual rate of 2.6% in the past three months, well above the

Federal Reserve's implied target zone of about 2.25%.

Price increases were mixed outside of food and energy.

Housing costs rose 0.4%. Owners' equivalent rent, the government's measure for owner occupied housing costs, rose 0.3% after an unusually tepid 0.2% gain in January. Rent of residence rose 0.4%, while hotel and motel rates rose 0.1%.

Medical care prices rose 0.5% in February, as prescription drug prices fell 0.4%. Physician services and hospital services prices rose 0.6%.

Transportation prices rose 0.1%. New car prices fell 0.1%, while airfares rose 0.9%.

Apparel prices rose 0.5%, the largest gain since September.

Tobacco prices rose 1%.