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US price rises kept in check

UNITED States consumer prices rose less than expected last month, fresh evidence that the recession is keeping inflation in check.

The Labor Department yesterday reported the Consumer Price Index rose a seasonally adjusted 0.1 percent last month, below analysts' expectations of a 0.3-percent rise.

Excluding volatile food and energy costs, core prices also increased 0.1 percent, matching expectations.

Low inflation enables the Federal Reserve to keep a key short-term interest rate near zero, where it has been for months.

The recession is holding down prices as the unemployment rate reaches a 25-year high and factories are operating at record low levels. Workers concerned about their jobs are less likely to push for higher pay, while low consumer demand has made it difficult for companies to raise prices.

Gasoline prices rose 9.6 percent last month, before seasonal adjustment, the department said. But they are still much lower than last year, when prices at the pump topped US$4 a gallon during the summer.

Due to that decline, consumer prices fell 1.3 percent in the 12 months ending last month, the steepest drop in 59 years. The core CPI has increased 1.8 percent since last year.

Food prices in the US fell for the fourth straight month in May, the department said, as costs fell for the major grocery food groups, including fruits and vegetables, meats and poultry, and dairy products.

Tobacco prices fell 0.3 percent after two months of large increases. Cigarette makers increased prices in the spring ahead of a tax rise.


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