Updated from 9:15 a.m. EDT

Consumer prices were steady in April, helped by a swift decline in the price for energy as crude oil dropped from its highs in March, but excluding the sometimes spastic energy and food prices, inflation crept up at a moderate pace.


Consumer Price Index

was unchanged in April for the first time since June 1999, the

Labor Department

said Tuesday. That follows the sharp 0.7% rise in March. The core CPI, which excludes food and energy, was up 0.2% compared to March's 0.4% rise. The overall CPI came in below the consensus expectations of 0.1%, while the core rate matched expectations.

Though inflation remained tame in April, the

Federal Reserve

added vigor to its year-long fight against inflationary pressures by raising short-term interest rates by half a percentage point, the largest increase in more than five years.

Tuesday's rate increase was the sixth in just under a year, but the largest in magnitude since February 1995. The Fed has hiked its benchmark short-term interest rate five times in 0.25-percentage-point increments since last June in an attempt to slow economic growth and head off inflationary pressure. The rate serves as a benchmark for other consumer-oriented interest rates like credit cards and mortgages. In theory, higher rates slow economic activity by making it more costly for consumers and businesses to borrow and spend.

But higher rates have thus far had little substantial impact on the booming U.S. economy, and officials at the Fed have repeatedly warned that rampant consumer demand and the extremely low unemployment rate are threatening to spur broad-based inflationary pressure.

"Against the background of its long-term goals of price stability and sustainable economic growth and of the information already available, the Committee believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future," the Fed said in a statement.

In the meantime, however, signs of a significant inflation trend remain elusive. The April CPI data highlight the benign inflation picture that has accompanied strong economic growth in recent years, even though accelerated growth is, in theory, inflationary. Economists argue that prices have remained stable largely due to low-cost imports from overseas and sweeping technology-related gains in worker productivity, which have allowed companies to keep the costs of finished goods down.

Some economists say that the steady behavior in prices in April is proof that the sharp consumer price increases seen in March did not necessarily represent the beginning of an inflationary trend, as some had thought.

"It now appears that March was an anomaly, which was distorted by the sharp movement in oil prices that month," said David Resler, chief economist at

Nomura Securities

in New York. "This is all part of the equation we've been seeing, where rising productivity, and the ability for businesses to more efficiently manage inventories, are helping to stave off significant price increases."

The subdued inflation shown in the April CPI was similar to the April

Producer Price Index, which fell 0.3% following an unnerving 1% rise in March. Like the CPI, those wide swings were largely due to volatile energy prices.

So far this year, consumer prices have risen at an annual rate of 4.3%, an acceleration from the 2.7% pace for all of 1999, but still regarded by most economists as benign.

Now that the Fed has hiked rates at a faster pace, said Resler, officials will need to closely monitor a variety of inflation gauges, wage measures, and other economic activity to see if its efforts are indeed slowing the economy and shrinking the risk of an outbreak of inflation.

"The Fed's best course at this point will be to wait to see if retail sales slow and if housing continues to slow. If economic growth can cool, productivity remains strong and consumer prices remain subdued, the Fed might not have a lot of motivation to keep raising rates after today," added Resler.

Overall consumer prices in April were heavily influenced by a sharp 1.9% drop in energy prices, the largest decline in nearly three years, as crude oil fell from the highs it hit in March. In late March, the

Organization of Petroleum Exporting Countries

agreed to boost production, which sent crude oil prices falling from their nine-year high in March at around $34 a barrel to around $25 to $27 a barrel. That helped to bring fuel oil prices lower by 4.8%, and gasoline prices down by 4.1%.

Lower energy prices also contributed to lower transportation costs, including a 0.5% drop in airfares.

But crude prices have climbed again sharply in recent days and recently traded around $29.92 a barrel, indicating that oil prices will likely be boosting overall inflation in May.

Clothing prices fell a sharp 0.5% after rising 0.3 in March, helping to subdue overall inflation.

Decelerating home costs were also a factor, as home price inflation dropped to 0.1% from 0.4% in March. While the housing market has slowed somewhat in recent months, some measures point to continued strong activity despite higher interest rates. A separate report from the

Commerce Department

Tuesday showed that new housing construction rose 2.8% in April to an annual rate of 1.66 million.

Tobacco prices rose 4.4% in April, following a 1.1% rise in March, as companies continue to pay settlement costs related to lawsuits. Automobile prices also rose 0.3%, their largest rise since August 1998, as auto dealers discontinued incentives meant to spur winter auto buying.