A pickup in energy prices helped drive consumer prices ahead at the sharpest rate in four months during September, according to a government report on Wednesday that was likely to keep the Federal Reserve wary about inflation.

The Labor Department said the Consumer Price Index, the most broadly used gauge of inflation, rose at a 0.3 percent rate last month after declining 0.1 percent in August.

The September rise in overall CPI was slightly ahead of Wall Street economists' forecast for a 0.2 percent rise and was the largest since a 0.7 percent jump in May.

So-called core prices that exclude food and energy costs were up 0.2 percent in September, in line with economists' expectations.

Consumer prices in September were 2.8 percent higher than a year ago, the largest 12-month increase since a matching 2.8 percent gain in March 2007, department officials said.

Core consumer prices were up 2.1 percent on a year-over-year basis, and analysts said they may remain at roughly that level.

"I don't expect a lot of improvement on that," said Kurt Karl, chief U.S. economist for Swiss Re in New York. "It's hard to get it below 2.1 percent this year."

George Goncalves, a chief debt strategist with Morgan Stanley in New York, said the CPI figures were likely to keep Fed policy-makers from cutting interest rates again soon even if they would like to do so to help stimulate the economy.

"What is probably more telling is that inflation stays sticky," Goncalves said. "Even though the Fed is concerned about housing spillover, it is in a tough spot with inflation staying sticky."

The dollar's value edged lower after release of the CPI data, as well as a separate Commerce Department report showing housing starts at their lowest level in 14 years last month. Government debt prices rose.

Energy prices rose 0.3 percent in September, a reversal after three straight months of declines including a 3.2 percent tumble in August. The department said that so far this year, energy costs have climbed at an 11.7 percent annual rate -- four times the 2.9 percent increase posted for all of 2006.

So far in 2007, consumer prices have risen at a 3.6 percent annual rate, well ahead of the 2.5 percent increase registered for all of 2006.

Food prices gained 0.5 percent in September, up from a 0.4 percent increase in August.

Inflation Consumer price index Morgan Stanley