WASHINGTON -- Consumer prices in September fell by the largest amount in 10 months, easing worries that inflation was about to get out of control.
The Labor Department reported that the consumer price index slipped 0.5 percent last month, a better-than-expected performance that was led by a huge decline in gasoline and other energy products.
Core inflation, which excludes energy and food, edged up a moderate 0.2 percent, the third straight month of modest gains following higher readings earlier in the year.
Wall Street investors cheered the news, believing it will convince the Federal Reserve that its goal of slowing the economy enough to cool inflation pressures is working and officials won't feel the need to boost rates at next week's meeting or for the rest of the year.
``We are in the midst of a near picture-perfect soft landing," said Bernard Baumohl, head of the Economic Outlook Group, a New Jersey forecasting firm.
Baumohl said the Fed, which raised rates 17 consecutive times before taking a pause in August and September, should remain on hold for the rest of this year and well into 2007.
The 0.5-percent decline in consumer prices last month was the biggest one-month decline since prices fell 0.7 percent last November as energy prices retreated after having spiked sharply with the shutdown of Gulf Coast refineries following Hurricane Katrina.
Gasoline prices fell 13.5 percent last month, the biggest one-month decline since a drop of 16.1 percent last November. Pump prices have dropped more than 80 cents after hitting a record $3.04 per gallon in early August.