A measure of consumer prices in the U.S. rose less than forecast in May, bearing out the Federal Reserve's view that broader inflation pressures would moderate as the economy cooled. So-called core prices, which exclude food and fuel, rose 0.1 percent last month after a 0.2 percent gain in April, the Labor Department said today in Washington. The median estimate of economists surveyed forecast a 0.2 percent gain. All prices rose 0.7 percent, the biggest increase since September 2005, led by a jump in gasoline costs. The report may alleviate Fed concerns that rising energy and food costs would translate into broader price gains. Smaller gains in core prices may eventually give Fed Chairman Ben S. Bernanke the option to lower interest rates should the economy falter. ``In terms of the Fed this is great news,'' said Lindsey Piegza, an analyst at FTN Financial in New York, which correctly forecast the core gain. ``Some of the price increases are being passed onto consumers but the majority are being taken on by producers.'' Factories in New York expanded at the fastest pace in a year, reflecting an increase in sales and orders, a Fed report today showed. The Fed Bank of New York's general economic index rose to 25.8 from 8.03 the prior month, signaling a pickup in manufacturing is being sustained. Readings greater than zero signal expansion. The yield on the Treasury's benchmark 10-year note dropped after the reports as concerns over inflation eased. The yield fell to 5.19 percent at 8:54 a.m. in New York, compared with 5.22 percent late yesterday. Economists forecast consumer prices would rise 0.6 percent, according to the median of 79 projections in a Bloomberg News survey. Estimates ranged from increases of 0.3 percent to 1 percent. Overall prices were up 2.7 percent from the same time last year, compared with a 2.6 percent gain in April. Core prices rose 2.2 percent from the prior year, the smallest 12-month gain since March 2006, compared with a 2.3 percent gain in April. The CPI is the government's broadest gauge of costs because it includes goods and services. A report yesterday showed wholesale prices rose 0.9 percent in May, matching the increase in cost of U.S. imports reported a day earlier. Today's report showed energy prices jumped 5.4 percent after rising 2.4 percent in April. Gasoline prices jumped 11 percent. Regular gasoline at the pump rose to a record $3.23 a gallon on May 23, compared with an average $2.83 in April, according to the American Automobile Association. Food prices, which account for about a fifth of the CPI, rose 0.3 percent after a 0.4 percent increase in April. Housing costs, which include some energy costs and account for one-third of the total consumer price index, rose 0.2 percent. Owner's equivalent rent, which makes up 30 percent of the core CPI, increased 0.1 percent, the smallest gain since June 2005, after rising 0.2 percent. Medical-care costs rose 0.3 percent after rising 0.4 percent. Clothing prices dropped 0.3 percent for a second month. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from airline fares to movie tickets and laundry charges. Auto prices fell 0.2 percent.