AP Economics Writer Martin Crutsinger is reporting that “inflation, after spiking at the start of the year, slowed sharply in February, reflecting large declines in fuel prices and the cost of clothing.”

In February, energy prices fell by 1.2 percent. Pump prices dropped 1 percent, home heating oil was down 2.8 percent and natural gas prices fell 4.5 percent, the biggest one-month drop in 4 1/2 years.

Food prices moderated, rising just 0.2 percent. A big increase in fruit prices was offset by declines in the prices of vegetables, dairy and poultry products.

[…]

Outside of food and energy, clothing costs posted a 1 percent decline last month, the biggest one-month drop in nearly five years. However, the price of airline tickets jumped 1.2 percent and medical costs were up 0.5 percent.

The Federal Reserve’s new beige book report, which offers a glance at economic conditions in all 12 Fed districts, showed that the American eceonmy grew at a “moderate” pace in January and February in most parts of the country.

High prices for fuel and raw materials continued, and both business and consumer spending grew.

Based on this information, the Fed will decide when and by how much to raise the overnight lending rate, which is the amount of interest banks charge to each other and forms the basis for determining the interest rate you pay for everyhitng from credit cards to mortgages and car loans.

Analysts expect two more quarter-point increases, one later this month and one in May, to bring the prime rate to 5 percent. The Fed has raised the rate 14 times since June 2004. It is expected the rate will stay at 5 percent for the second half of the year.

Unemployment fell slightly in February as the economy grew almost 5 percent between January and March.

And, if you really wanted to know, it’s called the beige book because of the color of its cover (See, I did learn something working at newspapers all those years!).

(Source: Bloomberg)