021125 Consumer Prices Rise Modest 0.3% In October

Washington - Consumer prices rose by a modest 0.3% in October as falling prices for airfares and cigarettes helped to temper the biggest increase in gasoline costs in six months.

The increase in the Consumer Price Index, the government's most closely watched inflation gauge, came after a 0.2% advance in September and matched the 0.3% gain in August, the Labor Department reported.

Excluding energy and food prices, which tend to swing widely from month to month, the "core" rate of inflation rose by 0.2% in October, up slightly form a 0.1% gain.

The latest reading on inflation -- both the overall CPI and the core rate -- matched analysts' expectations.

Even with interest rates at some of the lowest levels seen in decades, Federal Reserve Chairman Alan Greenspan told Congress last week that inflation does not currently pose a danger to the economy, which is struggling to return to full health after being knocked down by last year's recession.

In another report, the Commerce Department said the nation registered a $38.03 billion trade deficit in September, the second highest on record. The red-ink ledger reflected a surge in demand for foreign cars and airplanes.

The September deficit actually was down $254 million from the all-time high of $38.28 billion set in August. The 0.7% decline in the overall deficit from month to month reflected the fact that imports dropped by 0.5%, mainly because the volume of oil shipments was down sharply.

On the inflation front, Greenspan noted that many companies, facing the uneven economy and questioning consumers appetite for spending, have limited power to raise prices, helping to keep inflation under control, Greenspan said.

The Federal Reserve, wanting to strengthen the economic recovery, cut a key interest rate earlier this month, by a bold half a percentage point, marking the first rate reduction this year and the 12th since January 2001.

Fed policy-makers hope the rate cut will spur more consumer spending and motivate businesses to ramp- up investment, helping to boost the economic growth.

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