Feb. 23 (Bloomberg) -- Prices paid by U.S. consumers rose 0.1 percent in January, easing concern that surging commodities costs would spur higher inflation.

``The numbers today were quite tranquil,'' former Federal Reserve Governor Lyle E. Gramley said in an interview. ``We're in great shape.''

The increase in the consumer price index, reported by the Labor Department today in Washington, trailed the 0.2 percent median forecast in a Bloomberg News survey. Excluding food and energy, core prices increased 0.2 percent for a fourth month, led by tobacco, medical care and automobiles.

Bond and stock prices rose on speculation the Fed won't need to speed up interest rate increases. Companies including Delta Air Lines Inc. keep offering discounts to lure customers amid competition, excess capacity and rising costs. One measure of producer prices rose the most in six years in January, the government said last week.

Consumer prices rose 3 percent the past 12 months and rose 2.3 percent when food and energy are excluded, the biggest increase since August 2002.

Inflation may accelerate more this month, in part because of a 6.5 percent increase in crude oil prices in February and slower productivity growth, said economists including Gramley, an adviser at Stanford Washington Research Group in Washington.

``Enjoy the 0.1 we got,'' said Brian Jones, an economist at CitiGroup Global Markets in New York, in an interview. ``The good news that we got this morning, we are going to lose it next month.''

Market Reaction

January's 0.1 percent increase followed a December report that showed no change in inflation. Excluding energy, prices also were forecast to rise 0.2 percent, according to the Bloomberg survey of 74 economists.

``This is a good report given what we expected to see,'' said Joel Naroff, president of Naroff Economic Advisers in Holland, Pennsylvania, and the top economic growth forecaster in Bloomberg News surveys for the year ended in June, in an interview.

The Treasury's 4 percent note maturing in February 2015 rose 5/16 point, pushing down the yield 4 basis points to 4.25 percent at 12:25 p.m. in New York. The Standard & Poor's 500 Stock Index rose 5.9, or 0.5 percent.

``The bond market reacted positively to today's 0.2 percent increase in core consumer prices out of relief that it wasn't higher,'' said Michael Carey, chief economist at Calyon Corporate & Investment Bank, in New York.

Greenspan

Inflation expectations haven't worked their way into workers' pay demands. Weekly earnings adjusted for inflation fell 0.2 percent in January, the third decrease in the last four months, the Labor Department said in a separate release today.

Fed Chairman Alan Greenspan last week told lawmakers the economy has ``firmed'' and inflation remains low. ``The economy seems to have entered 2005 expanding at a reasonably good pace, with inflation and inflation expectations well anchored,'' Greenspan said.

``Things are looking good,'' said Carol Tome, chief financial officer at Home Depot Inc., in an interview. ``The housing market remains very strong, consumer sentiment is positive, unemployment is down, lumber prices have flattened and housing turnover is solid.''

The Atlanta-based company, the world's largest home- improvement retailer, plans to open 175 stores this year after same-store sales in 2004 rose the most in five years.

A rise in producer prices last month has yet to fully filter through into the final costs of goods and services. Wholesale prices excluding food and energy rose 0.8 percent last month, the most in more than six years, a Feb. 18 government report showed.

Pressure on Manufacturers

Manufacturers and other producers coping with rising costs of energy, steel and other raw materials are trying to raise prices to maintain profits. Today's worker-earnings report shows that labor costs are still under control, economists said.

``One thing we haven't seen is wage pressure, so we're more sanguine about inflation,'' said John Shin, an economist at Lehman Brothers Inc. in New York. ``For some goods like autos and airlines, some companies have demonstrated an almost limitless capacity to offer incentives.''

The consumer price index is the government's broadest measure of the costs of goods and services. Almost 60 percent of the index covers services. The index is the last of three monthly reports gauging inflation in the U.S.

Energy Prices

Energy prices, which account for about a 14th of the index, fell 1.1 percent in January after falling 1.3 percent a month earlier. Gasoline prices dropped 2.1 percent and home-heating oil costs slumped 5.2 percent, the biggest decline since May. Prices are rising this month.

Energy prices may contribute to faster inflation this month. Crude oil futures on the New York Mercantile Exchange yesterday traded above $50 for the first time since November as colder-than- normal weather in the U.S. and Europe boosted demand for furnace fuels.

Food prices, which account for about a fifth of the index, rose 0.1 percent in January after no change the month before. Services prices rose 0.2 percent in January for a second month and were up 3 percent in the past 12 months.

New car prices rose 0.7 percent in January after rising 0.3 percent in December. New vehicles cost 1.3 percent more in January than a year earlier.

Autos and Airfares

Some companies that limited the amount of discounting saw sales weaken. U.S. auto sales fell 12 percent in January from a month earlier as automakers pared incentives that had helped boost December sales. In response, Ford Motor Co. this month boosted incentives with five-year, no-interest loans on Explorer sport- utility vehicles and some F-Series pickups, matching General Motors Corp.

Airfares fell 0.9 percent last month. The cost of medical care rose 0.4 percent last month after a 0.3 percent increase in December. Housing costs, which include some energy costs and account for one-third of the index, rose 0.1 percent after rising 0.2 percent. A category designed to track rental prices rose 0.3 percent for a second month.

American Airlines Inc. and four other U.S. carriers matched Delta Air Lines's lower fares. American, the world's largest carrier, cut fares as much as 55 percent and ended requirements such as Saturday night stays, the airline said last month. Competition with low-fare airlines has kept ticket prices at 17- year lows.

Fed Policy

Computer prices rose 0.7 percent in January after a 2.1 percent decrease. The costs of computers are 13.6 percent cheaper than they were a year ago. Hewlett-Packard Co, the world's No. 2 personal-computer maker, said last week that it will take ``aggressive action'' and cut prices on its low-end printers to compete against Lexmark International Inc., Seiko Epson Corp. and Canon Inc.

``The economy's in good shape with low inflation confirmed by today's CPI report,'' Treasury Secretary John Snow told reporters in Washington.

Central bankers raised their benchmark overnight bank lending rate a quarter percentage point to 2.5 percent at the conclusion of their two-day meeting Feb. 2. It marked the sixth increase since June of last year.

``There is very little reason for the Fed to do anything different than they've been doing: raise rates a little at a time until they get to a neutral rate,'' said David Resler, chief economist at Nomura Securities International in New York, who correctly forecast the increase in consumer prices.

To contact the reporter on this story: Joe Richter in Washington at Jrichter1@bloomberg.net