Tags: CPI | Consumer | Prices | economy | inflation

Govt: Consumer Prices Plunge 0.7 Percent on Cheaper Gas Costs

Thursday, 26 Feb 2015 09:03 AM


A plunge in gas prices last month lowered consumer prices by the most in six years. But excluding the volatile food and energy costs, prices rose.

The Labor Department said Thursday that the consumer price index fell 0.7 percent in January, the sharpest drop since December 2008. Tumbling prices at the pump drove nearly all of the decline.

Core prices, which exclude food and energy, rose 0.2 percent.

Overall consumer prices have slipped 0.1 percent over the past 12 months. It is the first yearly drop in five years. And over the past year, core prices have risen just 1.6 percent, below the 2 percent level the Federal Reserve considers optimal for a healthy economy.

Excessively low inflation is complicating the Fed's decision on when to begin raising the short-term interest rate it controls. Most analysts think the Fed will start to raise rates from record lows in June or September.

Fed Chair Janet Yellen told Congress this week that she expects the effects of falling gas prices to fade in coming months, causing inflation to creep back toward the Fed's 2 percent target.

There are already signs that oil and gas prices have leveled off after collapsing nearly 60 percent from July through January.

Gas prices had fallen in January to an average of $2.03 a gallon nationwide, the lowest level in five years, according to AAA. But the average reached $2.33 on Wednesday, up 6 cents in just a week.

Oil prices topped $50 a barrel Wednesday, up from a low of $44 in January.

Other factors, particularly rents and hotel costs, are pushing up core prices. A measure of rents rose 0.2 percent last month. Hotel prices jumped 1.3 percent.

The vacancy rate for rental apartments fell to 7 percent at the end of last year, the lowest level in 25 years, according to Joseph Carson, U.S. economist for asset manager AllianceBernstein. That caused the average rent in 2014 to rise 3.4 percent, the sharpest increase in six years.

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A plunge in gas prices last month lowered consumer prices by the most in six years. But excluding the volatile food and energy costs, prices actually rose.
CPI, Consumer, Prices, economy, inflation
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2015-03-26
Thursday, 26 Feb 2015 09:03 AM
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