Inflation taps brakes

Inflation took a breather in February, as energy prices eased and food costs moderated, according to local and national reports released Thursday.

Along the Wasatch Front, Wells Fargo Bank reported that the cost of living fell 0.1 percent on a non-seasonally adjusted basis, led by a 0.2 percent dip in transportation costs and a 1.3 percent drop in the cost of groceries. Clothing, recreation and education/communications all saw increases in February, while housing, health care, utilities and the cost of eating out all held steady.

Also Thursday, the U.S. Labor Department reported that its national Consumer Price Index posted a 0.1 percent (seasonally-adjusted) increase last month after having jumped 0.7 percent in January. Again, energy prices led the way, posting a 1.2 percent decline last month after a whopping 5 percent increase in January. They included a 1 percent drop in gasoline pump prices, the department reported, a 2.8 percent fall in home heating oil costs and a 4.5 percent drop in the price of natural gas, which was the biggest decline in more than four years.

"We may be looking at the Goldilocks economy redux," said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston. "The economy is expanding smartly, job growth is solid and inflation remains largely under wraps."

Goldilocks also received applause from Wall Street, which has rallied in recent days, and was certain to be welcomed at the Federal Reserve, analysts predicted, which has been boosting interest rates since June 2004.

Sterling K. Jenson, regional managing director at Wells Capital Management in Salt Lake City, said the markets have been grappling with inflation, and whether energy prices would create broader inflationary pressures, as well as the question of interest rates.

But the price of crude oil continues to hover at around $62 per barrel, and economists expressed some relief Thursday that high energy prices seemed not to be rippling outward, resulting in widespread inflation.

Kelly K. Matthews, executive vice president and economist at Wells Fargo Bank, said that might mean the Fed can ease off on its interest rate tightening.

"There seems in the last little bit to be some determination that maybe, maybe these crude oil prices are simply not going to be translated into an inflationary environment that will spread to other areas other than the energy area," Matthews said.