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Consumer prices up by most in 10 months thanks to gasoline

Rising pump prices helped drive up costs for consumers to their highest in 10 months in February, government data showed on Friday. There was little evidence that underlying inflation was building, however.

The Labor Department said the consumer price index rose a seasonally-adjusted 0.4 percent in February, with the gas component driving over 80 percent of the change. It was the biggest increase in 10 months.

Without food and energy prices, the so-called core index rose 0.1 percent after gaining 0.2 percent in January. The February increase was below economists' expectations in a Reuters poll for a 0.2 percent rise.

The Federal Reserve said on Tuesday that the recent spike in energy costs would likely push up inflation temporarily. Over the long-term, inflation was likely to run at or below the its 2 percent target, it said.

While the central bank reiterated its expectation that overnight interest rates would remain near zero until at least through late 2014, it offered no clues on whether it would launch a third round of bond buying or quantitative easing, to keep borrowing costs low to stimulate the recovery.

Last month, overall inflation was pushed up by gasoline prices, which soared 6 percent, the largest increase since December 2010, after rising 0.9 percent in January.

Although surging gasoline prices are a strain on consumers, they have so far not caused a sharp pull back in spending, thanks to a strengthening jobs market.

Food prices were flat last month after rising 0.2 percent in January. Food prices were the weakest since July 2010.

Overall consumer prices rose 2.9 percent year-on-year after increasing by the same margin in January.

Core consumer prices were last month restrained by apparel prices, which fell 0.9 percent - the most since July 2006 - after rising 0.9 percent in January. There were also declines in the prices of tobacco, airline tickets and used cars and trucks.

But new motor vehicle prices rose 0.6 percent after being flat in January. While housing costs held up, owners' equivalent rent rose only 0.1 percent last month after increasing 0.2 percent the prior month.

In the 12 months to February, core CPI increased 2.2 percent after rising 2.3 percent in January. This measure has rebounded from a record low of 0.6 percent in October and the Fed would like to see that closer to 2 percent.

Reuters contributed to this report.

CNBC's Rick Santelli & Steve Liesman breakdown the consumer price index and discuss what it signals for the economy.