Tags: US | Economy

Consumer Prices Fall in April as Core Inflation Subdued

Wednesday, 19 May 2010 08:42 AM

Consumer prices declined in April for the first time in 13 months while core inflation rose during the past year at the slowest pace in 44 years.

The Labor Department said Wednesday that consumer prices edged down 0.1 percent last month, reflecting a big fall in energy prices. Core inflation, which excludes volatile food and energy, was flat in April.

During the past 12 months, core inflation is up just 0.9 percent, the smallest increase since 1966.

The recession in 2007 and 2008 has kept inflation tame, giving the Federal Reserve leeway to keep interest rates at historic lows to help jump-start economic growth. Some economists worry about the possibility of deflation, a destabilizing period of falling prices.

Economists had expected overall prices and core prices would edge up 0.1 percent in April.

The April drop in overall prices was the first decline since a similar 0.1 percent dip in March 2009.

Last month, energy prices tumbled 1.4 percent, the biggest one-month drop since March 2009. Gasoline prices fell by 2.4 percent.

Food costs edged up 0.2 percent, the same modest increase posted in March and something of a surprise to private economists. They expected a bigger increase because of a winter freeze on Florida vegetable and citrus crops.

Many economists believe the Fed will stay on the sidelines through the rest of this year.

Inflation at such low levels raises concerns of deflation. But most economists believe that threat remains remote. The overall economy has begun growing again and hiring is starting to pick up. The United States has not had to battle deflation since the 1930s.

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