US inflation edges higher

Prices paid by consumers rose by 0.1% last month

The prices paid by US shoppers edged up slightly in August, after recent big falls, official data have revealed.

I expect the Fed will continue cutting

Kurt Karl, chief US economist Swiss Re

Consumer inflation edged up by 0.1% last month, as falls in petrol, tobacco and airlines fares helped offset rising healthcare costs, a report by the US Labor Department said.

The figures, relating to a period ahead of last week's terrorist attacks, which sent energy prices soaring and led to record share falls, are likely to be largely overlooked.

But the data is being seen as offering some comfort to the US central bank, the Federal Reserve, which on Monday implemented the latest a series of interest rate cuts.

A higher inflation figure would have raised doubts over the wisdom of easing monetary policy too far.

More cuts?

On Monday, the Fed cut half a percentage point from interest rates.

The cut, the eighth this year, followed last week's terrorist attacks, which many analysts feared would further brake a US economy already suffering a slowdown.

Many economists predicted that Monday's rates reduction would not be the last in the current series.

"I expect the Fed will continue cutting," said Kurt Karl, chief US economist at reinsurance giant Swiss Re.

He predicted, however, that future cuts would be limited to one quarter of a percentage point.

"Obviously with the aggressive move yesterday, they have a shorter amount to go to zero," he said.

Energy costs decline

Last month's rise in inflation followed a 0.3% drop in July.

Excluding volatile food and energy prices, the index rose 0.2%, in line with economists' forecasts.

Energy prices dropped 1.9% in August, adding to a 5.6% decline in the previous month.

Petrol prices fell 2.4% in August after an 11% decline in July.