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Inflation slows more than expected

WASHINGTON - U.S. inflation slowed more than expected last month even as retail sales picked up, keeping pressure on the Federal Reserve to act soon to lessen the risk of a downward price spiral.

Federal Reserve Chairman Ben Bernanke signaled Friday the central bank would probably pump more dollars into the economy to bolster the recovery and keep deflation at bay.

The prospect of more easy money threatened to exacerbate global tensions about currency policies, although Washington delayed a much-anticipated decision on whether to label China a currency manipulator.

The U.S. consumer price index rose 0.1 percent in September, and the core index, which excludes volatile food and energy prices, remained unchanged for the second straight month, data released by the Labor Department showed.

Core prices were up just 0.8 percent in the 12 months through September, the smallest rise since 1961.

"If anything, that may make [the Fed] more likely to embark on asset purchases, and that may mean they're going to be more aggressive with those asset purchases," said Richard Bryant, head of treasury trading at MF Global Securities in New York.

Longer-dated U.S. Treasury prices fell on views the Fed would try to create inflation. U.S. stock indexes were mixed while the dollar recovered after hitting its lowest in more than eight months against the euro. - Reuters

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