Surging Energy Costs Push Inflation Up

WASHINGTON – Consumer prices shot up in January at the fastest pace in four months as the cost of gasoline and electricity posted big gains.

The Labor Department reported that its closely watched Consumer Price Index rose by 0.7 percent last month, with about 70 percent of that increase coming from higher energy costs. The core rate of inflation, which excludes energy and food, was better behaved, rising by 0.2 percent, a moderate increase that was in line with forecasts.

The Federal Reserve under new Chairman Ben Bernanke is closely watching to see whether the huge gains in energy prices over the past two years are starting to spill over into more widespread price troubles that would prompt the central bank to raise interest rates more aggressively to fight inflation.

The 0.7 percent overall rise in consumer prices was larger than the 0.5 percent increase that Wall Street had been expecting. It was the biggest price rise since a 1.2 percent surge in September.

AP