Gasoline prices are up almost 18% in September alone

Prices surged 1.2% last month - more steeply than expected - bringing the rate for the past 12 months to 4.7%.

But leaving out food and fuel - and thus the recent increases in petrol and heating oil following Hurricane Katrina - inflation was just 0.1%.

President George W Bush's spokesman said he was confident that the Federal Reserve could handle inflation fears.

The surging inflation rate has been caused by a supply bottleneck for energy in the US, after a huge slice of US refinery capacity was put out of action by hurricanes Katrina and Rita.

In another indication of the lingering devastation wrought by the storms, output at US factories, mines and utilities fell by 1.3% in September - the worst one-month drop in more than 23 years.

Retail sales excluding car sales rose 1.1% in the month, partly as a result of the petrol price hike.

Interest rate hopes

September brought a 12% rise in energy prices, the biggest jump in 48 years, with petrol up almost 18%.

But the low rate of so-called "core inflation" was welcomed by Wall Street with both bonds and shares rising.

Investors are betting that the news means the Federal Reserve could be less likely to push up interest rates rapidly to control inflation.

But some analysts think any such relief is premature.

"Today's news reinforces the view that the US consumer is holding out well, with US businesses and producers bearing the brunt of rising costs," said the Centre for Economics and Business Research in London.

"The Federal Reserve is likely to be worried by this and will want to stem the rise in prices; it still has the capacity to raise rates without damaging growth."

However, the centre's optimistic view was not reflected in the University of Michigan's latest index of consumer sentiment.

The university's preliminary figure for October was 75.4, down from September's final reading of 76.9.