US consumer prices top forecast

US Department of Labor figures showed rising medical and food costs pushed consumer prices up 0.2% in January.

The increase was below December's 0.4% rise but above the 0.1% forecast. Core inflation, which excludes food and energy, rose by 0.3% for the month.

While the Federal Reserve recently said inflation was in check, it also left open the chance of raising rates.

Inflation concerns

In recent months, rising energy prices have been a key inflationary factor, but last month, energy prices fell by 1.5%.

Petrol prices in January dropped 3% - leaving them 32% lower than at their high point in July 2006, when oil peaked at about $78 a barrel.

However, this drop was not enough to counter higher food prices, as dairy products, fruit and vegetables all became more expensive. Overall, food costs rose by 0.7%, the biggest increase since 2005.

Medical care costs went up by 0.8%, the sharpest rise in 15 years, as prescription drugs and doctor services became more expensive.

These latest figures brought the annual rate of consumer price inflation to 2.1% for the 12 months to January.

Federal Reserve chairman Ben Bernanke recently indicated in testimony to Congress that inflation was heading lower and would gradually fall over the next two years.

But analysts remain far from certain about how the Fed will choose to act in coming months.

"The Fed will be vigilant in the face of rising inflation," said Jeffrey Saut, chief investment strategist at Raymond James Financial.

Similarly, economist Simon Wallace of the Centre for Business Economic Research said that with "both headline and core inflation rising above expectations, inflationary concerns will not be diminished".

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