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Updated: U.S. CPI Falls 0.4% In December, Core Inflation Unchanged

By Kitco News
Friday January 16, 2015 8:30 AM

Editor's Note: The article was updated to include comments from CIBC and Capital Economics

(Kitco News) - As expected, lower gasoline prices are easing some consumer price pressures, according to the latest data from the Department of Labor.

Friday, the Bureau of Labor Statistics said its consumer price index dropped 0.4% on a seasonally adjusted basis last month, compared to November's decline of 0.3%. According to consensus forecasts, economists expected the inflation barometer to fall 0.3%.

"The gasoline index continued to fall sharply, declining 9.4 percent and leading to the decrease in the seasonally adjusted all items index," the report said.   

On an annual unadjusted basis headline, inflation rose 0.8%, down from November's increase of 1.3%.

However, removing volatile energy and food prices, the report said that core inflation remained unchanged in December, following November's increase of 0.1%. Economists expected core inflation to rise 0.1%. The report noted that this is only the second time since 2010 that core inflation did not rise.

On an annual basis, core CPI rose 1.6%, and remains below the Federal Reserve's target of 2.0%. The report noted that this is the slowest rise in annual inflation since February.

It is only a matter of time before headline inflation falls into negative territory as gasoline prices continue to decline, said Paul Dales, senior U.S. economist at Capital Economics. However, he added that he doesn’t expect weaker energy prices to filter down to core prices, and hence won’t impact the Fed’s decision to raise rates in June.

“For now, with the activity outlook strong and improving, it makes more sense for the Fed to “look through” a temporary bout of headline deflation and raise rates, most probably by June,” he said.

Avery Shenfeld, senior economist at CIBC World Markets, said it was surprising to see the unchanged reading in core data; he added there is a possibility that these prices continue to fall lower as the U.S. dollar remains strong, reducing import costs for consumer products.

By Neils Christensen of Kitco News; nchristensen@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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