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Gasoline, food prices subdue consumer inflation

A shopper walks by the sodas aisle at a grocery store in Los Angeles April 7, 2011. REUTERS/Mario Anzuoni
A shopper walks by the sodas aisle at a grocery store in Los Angeles April 7, 2011. REUTERS/Mario Anzuoni

WASHINGTON (Reuters) - Consumer prices fell in March for the first time in four months as the cost of gasoline tumbled, providing scope for the Federal Reserve to maintain its monetary stimulus to speed up economic growth.

The Labor Department said its Consumer Price Index slipped 0.2 percent, unwinding some of the 0.7 percent increase in February.

Economists polled by Reuters had expected a flat reading last month.

In the 12-months through March, consumer prices rose 1.5 percent, the smallest increase since July. Prices had increased 2.0 percent in February.

Stripping out volatile energy and food, consumer prices rose only 0.1 percent after advancing 0.2 percent in February. That took the increase over the 12 months to March to 1.9 percent. The so-called core CPI had increased 2.0 percent in February.

The signs of muted inflation pressures could bolster the case for the Fed to remain on its very easy monetary policy path, despite divisions among policymakers over continued asset purchases.

Minutes of the Fed's March 19-20 meeting published last week showed the U.S. central bank was moving closer to ending its monthly $85 billion purchases of mortgage and Treasury bonds to keep rates low and spur faster job growth.

But with data ranging from employment to retail sales and manufacturing suggesting that economic growth faltered at the end of the first quarter, it is unlikely the Fed will scale back assets purchases anytime soon.

In March, gasoline prices dropped 4.4 percent after spiking 9.1 percent the prior month. Food prices were flat after edging up 0.1 percent. There is still no sign of a pass-through from last summer's drought.

Though overall housing costs maintained their steady rise, owners' equivalent rent -- which accounts for about a third of the core CPI -- rose only 0.1 percent after rising 0.2 percent in February.

Apparel prices dropped 1.0 percent, the largest decline since April 2001, after falling 0.1 percent in February. New motor vehicle prices edged up 0.1 percent after falling 0.3 percent the prior month. Prices for used cars and trucks rose 1.2 percent, the largest since April.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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