Housing Starts Show Gain

U S consumer prices eased in March and housing starts unexpectedly rose, suggesting the economy will grow at a moderate pace with contained inflation.

The 0.1 percent increase in core consumer prices, which exclude food and energy costs, was the smallest in three months and follows a 0.2 percent February gain, the Labor Department said yesterday . Builders broke ground on new homes at an annual rate of 1.518 million, up 0.8 percent from the prior month, the Commerce Department reported.

The inflation figures mean Federal Reserve chairman Ben S. Bernanke may keep interest rates unchanged even as he predicts the economic expansion, currently in its sixth year, will pick up. Treasury notes rallied after the price report and held their gains after the Fed said industrial production fell.

"This is a big relief for the Fed," said Nigel Gault, chief U S economist at Global Insight Inc. in Lexington, Mass . "It's one good month, and the Fed is going to have to see more good numbers before it can relax, but it comes after a few months where inflation was rising."