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Higher gas prices lift consumer inflation 0.6 percent

Consumer prices rose in September as the cost of gasoline surged, posing a threat to consumers' spending power although faster inflation looked unlikely to derail the Federal Reserve's ultra-easy policy path.

The Consumer Price Index increased 0.6 percent last month, in line with analysts' expectations and matching August's reading, data from the Labor Department showed on Tuesday.

Gasoline prices jumped 7 percent in September after climbing 9 percent the prior month. Higher costs at the pump force many American consumers to cut back on other spending.

A measure of underlying inflation, however, was relatively muted. The core CPI, which excludes food and energy prices, increased 0.1 percent for a third month in a row.

In the 12 months to September overall consumer prices increased 2 percent, the fastest pace since April and up from 1.7 percent in August. Core prices also rose 2 percent in the year through September, up a tenth of a point from August's reading.

Most economists don't see inflation threatening the economy in the short or long term.

However, some believe the U.S. Federal Reserve would tolerate prices rising faster than the central bank's 2 percent target over the shorter term to allow faster economic growth as the country recovers from the 2007-09 recession.

Allowing this view to blossom, the Fed said in September it would keep interest rates low for a long time even after the economy strengthens.

The Fed targets a separate measure of inflation calculated by the Commerce Department which tends to run cooler than the consumer price index. That measure, called the personal consumption expenditures index, rose 1.5 percent in the 12 months through August, according to a September 28 report.

Last month, food prices rose just 0.1 percent despite a severe drought that has afflicted America's agricultural heartland.

Away from gasoline and food, the cost of apparel advanced 0.3 percent. New motor vehicle prices fell 0.1 percent and used cars and trucks dropped 1.4 percent. Housing costs edged up, with owners' equivalent rent rising 0.2 percent.

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CNBC's Rick Santelli breaks down the latest Consumer Price Index numbers.