Inflation

By Jim Puzzanghera
December 17, 2014

Plunging gasoline costs led to the largest drop in consumer prices in six years last month and added another complication for Federal Reserve policymakers as they try to determine when to start raising interest rates.

The Consumer Price Index declined 0.3%, , the Labor Department said Wednesday, much steeper than the 0.1% decrease economists had expected. The index was flat in October.

November was just the second time this year that the closely watched index fell and was the steepest decline since December 2008, the Labor Department said.

The report came as the central bank’s Federal Open Market Committee was preparing to issue its monetary policy statement Wednesday following a two-day meeting.

Analysts said the Fed could signal that it is getting closer to raising its benchmark short-term interest rate from the near zero-percent level it has been at since late 2008.

But falling prices could give Fed policymakers pause.

The Consumer Price Index rose just 1.3% in the 12-months ended Nov. 30, well below the Fed’s 2% annual target.

The Fed uses a different inflation gauge based on personal consumption expenditures that has been running lower than the Consumer Price Index.

“Inflation is below the Federal Reserve’s target and is slowing as energy prices continue their unexpected decline,” said Stuart Hoffman, chief economist at PNC Financial Services Group.

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