The small increase, reported Wednesday by the Labor Department, marked the second month that consumer inflation remained very much under control. The closely watched Consumer Price Index had posted no gain at all in December. Outside of food and energy, prices that economists watch for, a reading of so-called core inflation showed a modest 0.2 percent increase in January, the same as December.
The tame CPI report had followed a worrisome report on wholesale prices last Friday which showed a 0.3 percent gain overall and a sharp 0.8 percent jump in core inflation, the biggest increase in this area in more than six years.
The difference in the performance of wholesale prices and retail prices paid by consumers was just the latest in a number of conflicting signals about inflation that have roiled financial markets.
The dollar took a big tumble on Tuesday after a report that South Korea intended to invest less of its holdings in the U.S. currency, raising new fears that the dollar's three-year decline could intensify, a development that could worsen inflation in this country by making imported goods more expensive to American consumers.
The dollar's decline and a big jump in the price of oil sent the Dow Jones industrial average tumbling by 174 points on Tuesday, its biggest one-day point loss since mid-2003.
Most economists are forecasting that inflation will actually moderate this year, a prediction that is based on a belief that oil prices, which hit a record of $55 per barrel last October, will fall below $40 per barrel by the end of this year. However, they concede that further attacks on oil pipelines in Iraq or other turmoil in that region could destroy their hopes for falling energy prices.
Federal Reserve Chairman Alan Greenspan testified last week that the central bank believed inflationary pressures were remaining at a relatively low ebb but Fed policy-makers were ready to respond quickly should price pressures begin to mount.
For January, energy prices dropped by 1.1 percent, reflecting declines of 2.1 percent for gasoline pump prices, 3 percent for natural gas and 5.2 percent for home heating oil. In December, energy prices had fallen by 1.3 percent after two months of big increases.
Food prices edged up a small 0.1 percent in January following no change in December. The moderate food rise last month was helped by a huge 11.8 percent drop in vegetable prices, the biggest one-month decline in this category in more than 13 years. It reflected in part a return to more normal supplies after the hurricane disruptions of last fall.
The increase in prices outside of food and energy represented the fourth straight month that core inflation posted a moderate 0.2 percent rise.
As with wholesale prices, the biggest gains were in new cars and tobacco. New car prices, reflecting the removal of attractive end-of-year incentive offers, were up 0.7 percent while tobacco costs rose by 1.9 percent, the biggest increase since August 2002.