WASHINGTON — Retail prices on women’s apparel rose a seasonally adjusted 0.4 percent last month, matching the increase for all goods and services.

The so-called core rate of inflation, a closely watched measure of prices that excludes food and energy, advanced 0.3 percent for the third straight month, according to the Labor Department Consumer Price Index released Wednesday. The boost was propelled by higher housing costs and exceeded the 0.2 percent rise forecast by economists. It solidified expectations that the Federal Reserve will again raise interest rates to keep prices in check.

Fed policy makers will meet on June 28 and 29, when experts anticipate a 0.25 percentage point interest rate increase to 5.25 percent. There have been 16 rate boosts in two years. Fed chairman Ben Bernanke said last week that higher core prices were “unwelcome developments” and pledged vigilance against inflation.

Investors, having driven stocks down on Tuesday after wholesale prices for last month also showed signs of inflation, took the news in stride and rallied around positive outlooks in the tech sector to push the Dow Jones Industrial Average up 110.78 points to close at 10,816.92, the first gains since June 8.

“Inflation is definitely on the rise,” said Richard Yamarone, chief economist at Argus Research, who characterized as a “slam dunk” the prospects for another rate boost. “We’re starting to see these higher prices crimp consumer spending.”

A Commerce Department report Tuesday found that all retail and food service sales rose 0.1 percent last month after a 0.8 percent jump in April.

Although a slowdown in consumer spending may be in the offing, Yamarone said shoppers would still be out in the stores because of a solid employment picture with unemployment of 4.6 percent, the lowest level since July 2001.

The Fed’s Beige Book, released Wednesday, which provides an anecdotal report on the state of the economy from mid-April through early June, found continued economic expansion with some signs of deceleration.

Business contacts in some of the Fed’s 12 districts reported that “sales were slowing or weaker than anticipated at discount stores or to lower-income customers.” The Dallas and Richmond districts reported weaker growth in retail sales as the St. Louis district reported a drop in sales.

This story first appeared in the June 15, 2006 issue of WWD. Subscribe Today.

Overall, the bump in the CPI shows that consumers are strong enough to pay increased gas prices and still accept higher prices from retailers, said Peter Rodriguez, professor of economics at the University of Virginia’s Darden School of Business.

“This is a relatively difficult issue for the Fed to deal with, but it is, in some sense, a more positive issue than it has been in the past; it’s not a recession, it’s not high unemployment, it’s very strong consumer power and demand driving up core prices,” he said. “I don’t think it’s all that worrisome.”

There is concern, though, that the Fed, in increasing interest rates, will clamp down too much on economic growth.

“There definitely is a danger,” said Goldman, Sachs & Co. economist Andrew Tilton. “The economy’s slowing down already, both because of higher energy prices and because the house market is clearly slowing.

Although prices on women’s apparel ascended last month and were 0.7 percent above a year earlier, the overall trend is still a deflationary one, with consumers paying 5 percent less than five years ago.

Stiff competition among stores, efficiency-creating consolidation within the ranks of manufacturers and increased access to cheap labor overseas all have worked to lower prices in recent years.

Within the women’s area, outerwear prices inched up 0.3 percent for the month, but were down 8.7 percent from a year earlier, as dresses increased 3.4 percent last month and 5.4 percent over the last 12 months and suits and separates were up 0.3 percent for the month and 1.6 percent for the year.

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