WASHINGTON, Feb 23: US Treasury Secretary John Snow said on Wednesday that the world's biggest economy was in "good shape" and that inflationary pressures are being kept in check.

Snow spoke to reporters at the Treasury after a government report showed consumer prices ticked up a modest 0.1 per cent in January as falling energy costs helped offset other price gains. "The economy is in good shape," Snow said adding that "low inflation was confirmed by today's CPI (consumer price index) numbers."

The Labor Department said in a report released earlier Wednesday that the core rate of consumer price inflation, which excludes volatile food and energy costs, rose 0.2pc last month.

The small rise in headline inflation was a little weaker than Wall Street had forecast, analysts had expected a rise of 0.2 per cent, while the gain in the core rate was in line with most forecasts.

The Treasury chief also said the US economy had demonstrated robust growth of late. US economic growth cooled in the fourth quarter to a 3.1 percent annualized rate, the weakest in seven quarters, and below economists' forecasts which had called for growth of 3.5 percent.

However, for all of 2004, the economy grew 4.4 percent, the fastest since 1999. Snow hinted that the fourth quarter gross domestic product estimate would likely be revised higher when an initial revision is released by the government Friday.

We've had "good GDP growth," he said, adding "it looks like a possible revision for the fourth quarter based on stronger performance of exports." "2004 was clearly a big turning point for the economy," he said.

Growth has been partly crimped by the United States' bulging trade and budget deficits. "We recognize we need to continue to focus on deficit. We have to make sure we watch spending, we constrain spending," Snow added.

US has a strong dollar policy: US President George W. Bush's national security adviser said Wednesday the United States had a "strong dollar" policy. "Our policy is very clear in terms of a strong dollar," Stephen Hadley told reporters after Bush met in Mainz with German Chancellor Gerhard Schroeder in a bid to dispel bad blood over the US-led war in Iraq, which Berlin opposed.

Hadley said the relatively weak dollar "did not come up" in Bush's talks with Schroeder or with European leaders in Brussels, and he played down reports that South Korea's central bank would diversify its foreign reserves.

Asked whether Washington had sought to signal displeasure with such a move, Hadley said that would be up to the US Treasury Department, but added: "I would be surprised, because there's no news about making adjustments in holdings. Banks do that."

South Korea's central bank on Wednesday denied a report that it planned to reduce its dollar holdings. The report on Tuesday sent the dollar plummeting to a one-month low against the euro. But the bank said it would diversify some of its holdings of foreign reserves, which total more than 200 billion dollars, into high-yielding non-government debt paper such as company bonds or other asset-backed securities. -AFP