A sharp drop in energy prices pulled US consumer prices down 0.1 per cent last month, but underlying inflation continued a steady advance, according to a government report today that could bolster expectations for a steady diet of interest-rate rises.
The drop in the overall CPI reflected a 1.8 per cent slide in energy costs.
Fuel prices dropped 4.8 per cent and the cost of gasoline fell 3.7 per cent. Natural gas prices, however, built on earlier increases by climbing 1.0 per cent.
Excluding volatile food and energy costs, the Consumer Price Index, a widely used inflation gauge, rose 0.2 per cent, the US labour department said.
Core prices, in contrast, advanced at a more-moderate 2.2 per cent .
The rise in the core index matched expectations in financial markets, which had expected overall prices to hold steady.
The core price gain was the biggest since 2001 and marked a doubling from the pace in 2003. Federal Reserve officials have raised overnight borrowing costs by a quarter-per cent age point at each of their last five policy meetings, bringing them to 2.25 per cent from a 1958 low of 1 per cent.
Policymakers, who next gather in early February, have said they should be able to continue to push rates up at a "measured pace" and head off any troublesome inflationary pressures.