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Ahead Of The Bell: Consumer Prices

WASHINGTON (AP) â¿¿ Consumer prices probably rose in January for the first time in four months because of rising gas costs. But economists are downplaying the anticipated bump because inflation has been tame otherwise.

Economists forecast that the consumer price index increased 0.3 percent in January, according to a survey by FactSet. That would follow flat readings for the two previous months and a drop of 0.1 percent in October.

Excluding volatile food and gas costs, so-called "core" prices are expected to have risen 0.2 percent, up from December's 0.1 percent increase.

The Labor Department will issue its report at 8:30 a.m. Eastern time Friday.

Low inflation, combined with recent modest increases in income, gives consumers more buying power and should add to economic growth. A sharp jump in gas and food prices early last year left Americans with less money to spend on other items, dragging on the economy.

Modest price increases also give the Federal Reserve more room to keep interest rates low, as part of its efforts to accelerate growth. It recently said it plans to keep the short-term rate it controls near zero at least until late 2014.

If inflation were to rise rapidly, the Fed would come under pressure to increase rates.

A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.

Consumer prices rose 3 percent in December, compared to a year earlier, down from a 3.4 percent pace in the previous month. That's also below the recent peak in September, when prices were 3.9 percent higher than a year earlier.

Many economists say inflation has likely peaked and they expect it to slowly decline this year. The prices of many farm commodities, such as corn and wheat, have declined. That's slowed the growth in the cost of food on grocery store shelves.

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