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Cheaper gas lowers U.S. consumer prices 0.3 percent

Updated: December 14, 2012 2:06PM



WASHINGTON — A steep fall in gas costs pushed down a measure of U.S. consumer prices last month, keeping inflation mild.

The seasonally adjusted consumer price index dropped 0.3 percent in November from October, the Labor Department said Friday. Gas prices fell 7.4 percent, the steepest drop in nearly four years. That offset a 0.2 percent rise in food prices.

In the past year, consumer prices have risen 1.8 percent, down from October’s 12-month increase of 2.2 percent.

Excluding volatile food and gas, prices ticked up 0.1 percent in November and have risen 1.9 percent in the past year. Higher rents, airline fares and new cars pushed up core prices. The cost of clothing and used cars fell.

High unemployment and slow wage growth have made businesses reluctant to raise prices. Many worry higher prices could drive away customers. That’s helped keep inflation mild.

Modest inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation also makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

The Fed said Wednesday that it now plans to keep the short-term interest rate it controls at nearly zero until the unemployment rate falls to at least 6.5 percent and inflation isn’t expected to top 2.5 percent in the next two years.

It was the clearest sign yet that they will keep rates super-low even after unemployment falls further and the economy picks up.

Unemployment was 7.7 percent last month and the Fed projects it will stay above 6.5 percent until late 2015. The Fed also projects inflation will stay at or below 2 percent for the next three years.

The Fed also said it would continue purchasing $85 billion in Treasury bonds and mortgage-backed securities each month in an effort to push down longer-term interest rates.



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