Inflation Up Slightly

Washington, DC, Oct. 18--Despite a big jump in energy costs, consumer inflation rose modestly in September. Economists said the latest batch of economic data paints a picture of an economy that, while inching forward, faces no threat from inflation. The government''''s most closely watched inflation gauge, the Consumer Price Index, edged up 0.2% last month, down from a 0.3% increase in August, according to the Labor Department. Low inflation gives the Federal Reserve leeway to hold short term interest rates steady, or even nudge them down a bit, at its next meeting on November 6. Low interest rates might motivate consumers and businesses to spend and invest more and give further impetus to the economy. 3The inflation outlook puts the Fed in a good position,2 said Oscar Gonzalez, economist at John Hancock Financial Services. The inflation report showed energy costs shooting up 0.7% in September, the biggest increase since April, with a 1% jump in gasoline prices. Rising energy costs reflected uneasiness that a possible U.S. war in Iraq might disrupt global oil supplies. Food costs rose 0.2% in September as falling prices for vegetables and pork helped offset higher fruit and poultry prices. Excluding energy and food prices, the core inflation rate inched up 0.1% in September, an improvement over the 0.3% rise in August. Prices for airline tickets dropped 2.1%, and computer prices fell 4.1%. But costs for hospital services and tuition each went up by 0.7%. Still, economists believe the weak economy will make it difficult for many companies to raise prices. While the tame inflation environment can provide good deals for shoppers, it translates into a less generous cost of living adjustment for retirees, who can be saddled with medical bills, an area were costs are rising, not falling. Social Security recipients will get a 1.4% cost of living increase in their monthly checks next year, the smallest increase in four years. The increase will mean an extra $13 a month for the typical retiree.