US consumer prices slip in February

WASHINGTON (AP) — U.S. consumer prices fell in February, dragged by another steep drop in energy prices. However, core inflation managed to tick higher, led by the biggest jump in clothing costs in seven years.

Consumer prices edged down 0.2 percent last month after no change in January and a small decline in December, the Labor Department reported today.

Core inflation, which excludes the volatile categories of food and energy, rose 0.3 percent following a similar 0.3 percent rise in January.

Over the past 12 months, overall inflation is up a modest 1 percent. But core inflation is up 2.3 percent, the biggest 12-month gain since May 2012.

The Federal Reserve is closely watching inflation, which has been stuck at low levels, to determine when to raise interest rates further. The 12-month rise in core prices is above the Fed's target for annual price increases of 2 percent. However, the modest 1 percent overall price gain over the past year is still well below the Fed target.

Steve Murphy, U.S. economist for Capital Economics, said the rise in core inflation suggests that the Fed will soon need to start raising rates to keep inflation from climbing too quickly.