Washington, April 13 (Bloomberg) -- U.S. consumer prices probably rose in March atthe slowest pace in seven months, capped by falling energy prices and widespreaddiscounting, analysts said ahead of a government report. The consumer price index, the most widely followed gauge of U.S. inflation, probablyrose 0.1 percent last month after a 0.3 percent rise in February, according to themedian of 33 forecasts in a Bloomberg News survey. That would be the smallestincrease since a similar gain in August. The CPI's core rate, which excludes food and energy, probably rose 0.2 percent inMarch after a 0.3 percent increase a month earlier, the survey said. Oil prices felllast month, and the economic slowdown is forcing some businesses to cut prices,keeping inflation tame. ``Weak demand and intense competition should constrain price increases goingforward,'' said Michael Moran, chief economist at Daiwa Securities America Inc. inNew York, in a report. The Labor Department releases the CPI report on Tuesday at 8:30 a.m. Washingtontime. The expected decline in energy prices will probably be lead by lower gasoline prices,analysts said. The price of gasoline at the pump fell as low as $1.44 a gallon inMarch, the lowest since February 2000, according to data from the Department ofEnergy.
Helping the Fed
The absence of any inflationary pressure has made it easier for Federal Reservepolicy makers to lower interest rates in order to stimulate sluggish economic growth.The economy grew at a 1 percent pace in the fourth quarter, the slowest in 5 1/2years, prompting the Fed to lower their target for the overnight bank lending rate byone-and-a-half percentage points to 5 percent. The Fed cut rates twice in Januaryand once in March. ``The inflation rate is still relatively contained and we have that flexibility to engage inthe action that we have in January and March,'' said Thomas Hoenig, president of theKansas City Fed Bank, in a speech this week. Sluggish demand is forcing firms in several industries, such as consumer electronicsand automobiles, to discount prices in order to trim inventories. Palm Inc., the world's largest maker of hand-held personal computers, reducedprices this week after lowering sales forecasts last month. Prices were cut between9 percent and 14 percent to help trim inventories, which could triple this quarter, thecompany said.
Health Costs Rising
Automobile makers are also using discounts to attract buyers. Incentives throughoutthe auto industry averaged $1,462 per vehicle in March, while U.S. automakers' pricebreaks were higher, led by DaimlerChrysler AG's Chrysler average of $2,068. Consumers may still notice rising food and medical costs in March. Supplies of beefand pork are falling after the U.S. Department of Agriculture last month widened aban on meat to include all of Europe, where foot-and-mouth disease has infectedlivestock. Outback Steakhouse Inc., which operates several restaurant chains, said last weekit will probably run out of baby-back pork ribs that it imports from Denmark. If thecompany does run out, the restaurant chain said it will sell ribs from the U.S., andmay increase prices. Tenet Healthcare Corp., the No.2 U.S. hospital chain, said last week fiscal third-quarter profit rose 30 percent as it treated more patients and got higher premiumsfrom insurers. The company expects to continue raising prices for insurers throughfiscal 2003. ``I don't see us returning to a period for the foreseeable future where we're not goingto be getting any rate increases at all,'' said Thomas Mackey, Tenet's chief operatingofficer. Insurance companies are expected to pass these increases along to employers andother customers by raising premiums by an average 9.8 percent this year, up froman 8.3 percent increase in 2000, according to a forecast by Health Research andEducational Trust, a research affiliate of the American Hospital Association.