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September 17, 2009

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Consumer prices rise in US

CONSUMER prices in the United States rose slightly in August due to higher gas prices, another sign the weak economy is keeping inflation in check.

While prices are up slightly over the 12 months ending in August, they are well within the US Federal Reserve's comfort zone. That means the central bank faces little pressure to raise its benchmark interest rate, a step it takes to ward off high inflation. The Fed has reduced the interest rate it charges banks for overnight loans to a record low of nearly zero in an effort to revive the economy.

The US Labor Department said yesterday that the Consumer Price Index rose 0.4 percent in August, after a flat reading in July. Wall Street economists expected a 0.3 percent increase, according to a survey by Thomson Reuters.

Excluding volatile food and energy prices, the core price index rose 0.1 percent, matching expectations.

Prices fell 1.5 percent in the past year, the department said, as gas prices dropped sharply from record levels last summer.

The core CPI rose 1.4 percent in the 12 months ending in August, the smallest increase in more than five years.

A 1.3 percent drop in the price of cars last month, the steepest fall in nearly 37 years, held back the core index. Discounts stemming from the government's Cash for Clunkers program - which provided rebates of up to US$4,500 to consumers who traded in older cars for newer, more fuel-efficient models - caused the decline.

Gasoline prices rose 9.1 percent in August on a seasonally adjusted basis and accounted for 80 percent of the rise in the consumer price index. Still, gas prices are 30 percent below last year's record levels.


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