Consumer inflation failed to feature in November as Americans enjoyed a third straight month of price relief led by big declines in energy costs.
The Labor Department reported today that consumer prices were unchanged last month, even better than the small 0.2 per cent analysts had been expecting.
Prices had actually fallen by 0.5 per cent in both September and October. The good news in all three months came from tumbling gasoline and other energy costs, which are retreating after a big run-up earlier in the year.
Core inflation, which excludes food and energy, was also unchanged in November, the best showing since June. That was likely to boost spirits at the Federal Reserve, which is working to keep inflation in check.
With one month left in 2006, overall inflation is rising at an annual rate of 2.2 per cent, down from last year's 3.4 per cent increase. Core inflation, excluding energy and food, has been rising at an annual rate of 2.6 per cent this year, an acceleration from the 2.2 per cent gain turned in last year.
The Fed's comfort zone for core inflation is between 1 per cent and 2 per cent. It has been working to slow the economy enough through higher borrowing costs to reduce core inflation.
At their last meeting of the year on Tuesday, Fed policymakers opted to leave rates unchanged after engineering 17 consecutive rate rises from June 2004 through June of this year.
Many economists believe the central bank is on the verge of achieving its hoped-for soft landing and will probably leave rates unchanged until May or June of next year, when the next move is expected to be a rate cut to counter unemployment, which is expected to rise in response to the slowing economy.
For November, overall energy costs were down 0.2 per cent following even bigger declines of 7.2 per cent in September and 7 per cent in October. US prices have retreated after global crude oil prices began falling this summer.