Page last updated at 13:21 GMT, Wednesday, 14 May 2008 14:21 UK

US inflation eases but food soars

Wal Mart shoppers
Prices rose in all categories of food

US food prices jumped at the fastest pace for 18 years in April, but consumer price inflation still eased.

Consumer prices rose 0.2% in the month, down from March's figure of 0.3%, even though food costs jumped by 0.9%, according to Labor Department figures.

Rising food prices were offset by falling prices in categories such as household furnishings and transport.

But with oil prices hitting $127 a barrel there are concerns that there may be more severe inflation to come.

Slowing inflation means that the Federal Reserve is more likely to be able to cut interest rates again.

"It allows the Fed to do what it feels it has to do to sustain growth later this year," said David Watt at RBC Capital Markets in Toronto.

The annual rate of inflation came in at 3.9%, which was slightly lower than had been expected.

Core inflation, which excludes food and energy prices, rose 2.3% in the year to the end of April.

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