CPI unchanged in February, making it easier for the Fed to cut rates

Consumer prices unexpectedly remained the same in February 2008, the U.S. Labor Department announced Friday, as fuel costs dropped, helping retail inflation take a breather.

Also, the core consumer price index rate -- which excludes the often-volatile food and energy categories -- also was unchanged.

Analysts surveyed by Bloomberg News had expected the full rate and the core rate to increase by 0.3% and 0.2%, respectively. Consumer prices increased 0.4% in January 2008.

In February 2008, energy costs fell 0.5%, transportation costs fell 0.7%, new car prices dropped 0.3%, drug prices rose 0.1%, rental costs food gained 0.4%, apparel costs fell 0.2%, and medical care costs rose 0.1%.

Year-over-year, CPI is running at a 4% rate; the core rate, 2.3%.

Economist Steve Affinito said the core rate will make it easier for the U.S. Federal Reserve to continue to lower interest rates to stimulate the U.S. economy, in the midst of its worse housing slump in more than 15 years, with accompanying credit market stress. "This is a really encouraging core number," Affinito said. "It's a sign that price pressures in commodities are not showing up at retail level as fully as expected."