US inflation fears ease in March

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Concerns about the pace of US inflation eased slightly after official figures showed that a key gauge of price growth declined in March from previous months.

Core inflation, which excludes energy and food costs, rose by 0.1% in March, down from 0.2% in February and 0.3 in January, the Labor Department said.

However, analysts said that high fuel costs meant consumer prices overall were still too high for a rate cut.

Consumer prices rose by 0.4% from February, and 2.8% from a year earlier.

Richard Dekaser, an analyst at National City said that the core inflation figure was "unambiguously good news".

"There's a lot of good news there," he added.

Brian Gendreau of ING Investment Management said that the report would not prompt a rate cut rate, "but a few more reports like these, and it means the Fed is near achieving its goal" of slowing inflation from dangerous levels.

Worries stay

The big concern in March was a jump in petrol prices, which increased by 10.6% from the same month a year earlier.

The Labor Department said that during the first three months of 2007 consumer prices increased overall by a seasonally adjusted annual rate of 4.7%, almost double the rate in the same period a year earlier.

Higher energy costs accounted for 41% of the total gain in first-quarter consumer prices, it said.

The effect of higher interest rates and energy costs, both of which take money out of a consumer's pocket, has been evident in the US housing market.

On Tuesday, the Commerce Department said that housing starts increased 1.518 million in March from 1.506 million in February.

Analysts said that while there was an increase last month, the general trend for housing starts was one of decline as demand slows and the US housing market cools.

Hugh Bromma from Entrust Group in San Francisco said that while the latest report was optimistic in the near term, "in the longer-term we're going to see the correction continue".