The lower-than-expected core CPI report released Wednesday should allow the Fed to cut rates once again rather than worry about rising inflation, an economist says. However, as energy prices continue rising, there may be reason to put more emphasis on total inflation rather than the core figure, says another economist.

The seasonally adjusted core U.S. Consumer Price Index rose by 0.1% in April (0.104%), one tenth lower than expectations and contributing to a 2.3% year-over-year change, according to a U.S. Department of Labor report on Wednesday.

Eric Lascelles, chief economics and rates strategist at TD Securities, said it was "a pretty soft report" in both the core headline as well as the details, adding that this level of inflation is consistent with a viewpoint for the Fed to continue cutting rates in June. He said it would be difficult to see core prices rising in the near term as the economy trends slower.

Year-over-year core prices are "still hotter than the Fed would like to see," he added, but they are "several months past their peak."

The all-items headline figure increased 0.2% month-over-month (0.207%), also a tenth lower than expectations and contributing to an annual increase of 3.9%.

CIBC World Markets economist Avery Shenfeld said the report was a "little bit of a pause in the inflation storm," but, he cautioned, "don't hold your breath."

Shenfeld expects the headline figure to jump up next month as a result of rising energy prices, and he said this prospect deserves more attention than it gets.

Core rates are preferred because they exclude the often volatile energy and food components, but Shenfeld said those components are steadily trending upwards rather than moving up and down, so a focus on the core rate will be less helpful - even misleading - in the future.

Paul Ashworth, senior U.S. economist at Capital Economics, called the report "encouraging in some ways," but he said the surge in commodity prices puts near-term risks on the upside.

"Overall, a little better than expected but nothing to change the general outlook for inflation, which is very bad in the short-term and a little brighter in the medium term, assuming that the weak economy begins to have an effect and commodity prices level out," he said.

Lascelles said the report could be even softer if it weren't for the way that housing is calculated. He said the report looks at rent costs, which have been rising recently, rather than home prices, which have been deflating sharply since August 2007.

Reacting to the 2.0% monthly decrease in gas prices, Ashworth said the conspiracy theorists will be up in arms.

"The bottom line, however, is that gasoline prices always rise sharply around this time of year, in the run-up to the start of the driving season. The raw increase this year was actually smaller than we would normally see - hence the decline in seasonally adjusted terms," he said.

Only a handful of the 77 economists surveyed prior to the report expected to see core inflation deviate higher or lower than the consensus 0.2% forecast.

By Patrick McGee edited by Nancy Girgis