U.S. Economy: Consumer Prices Decrease as Energy Costs Retreat (Timothy R. Homan)

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(Bloomberg) -- U.S. consumer prices fell in August for the first time in almost two years as fuel costs declined from record levels.

The consumer price index dropped 0.1 percent after jumping 0.8 percent the prior month, the Labor Department said today in Washington. So-called core prices, which exclude food and energy, rose 0.2 percent, as forecast, after a 0.3 percent gain.

The diminishing threat of inflation may offer scope for Federal Reserve policy makers to lower interest rates to alleviate the collapse in credit that brought down Lehman Brothers Holdings Inc. Consumer prices are moderating as companies including General Motors Corp. and J.C. Penney Co. offer discounts to revive their sales.

``Inflation is not a concern for the Fed'' right now, said Ryan Sweet, an economist at Moody's Economy.com in West Chester, Pennsylvania. ``The moderation in headline inflation is going to reflect lower energy prices, a global economy that is on the edge of recession and modest wage pressures.''