U.S. consumer inflation moderated in April, despite record gasoline prices, the Labor Department reported Tuesday. Consumer prices rose by 0.4 percent last month, following a 0.6 percent jump in March, the government said. Core inflation, which excludes volatile food and energy costs, edged up just 0.2 percent as falling prices for clothing, airline tickets and tobacco products helped restrain underlying inflation. The April increase was slightly lower than expected, which happened despite a 4.7 percent increase in gasoline prices and a 10.6 percent increase in March. Through the first four months of this year, consumer inflation is rising at an annual rate of 4.8 percent, almost double the 2.5 percent increase for all of 2006. The acceleration has occurred in large part because of higher costs for food and energy. However, excluding energy and food, core inflation is up at an annual rate of just 2.2 percent through April, an improvement from the 2.6 percent rise in core prices for all of 2006. Food costs, which have been pushed higher by the increased demand for corn to use in ethanol production, were up at an annual rate of 6.7 percent in the first four months of this year compared with a 2.1 percent rise for all of 2006. Analysts believe the Fed will keep interest rates at 5.25 percent until core inflation falls even more.
