Unexpectedly, CPI Falls In December

Jan. 18, 2006
Although energy prices have risen in recent days, a large decline in energy prices in December caused the U.S. Labor Department's Consumer Price Index (CPI) to fall one-tenth of a percent. Economists generally had expected the seasonally adjusted index ...

Although energy prices have risen in recent days, a large decline in energy prices in December caused the U.S. Labor Department's Consumer Price Index (CPI) to fall one-tenth of a percent. Economists generally had expected the seasonally adjusted index to increase two-tenths of a percentage point. Its index for energy declined 2.2% last month, the third consecutive decreased, the department noted.

The so-called core CPI, which does not included price changes for food and fuel, rose two-tenths of a percent in December, just what most economists expected.

"Clearly inflation poses no real threat, but overly aggressive [Federal Reserve] interest rate policy could torpedo the economic expansion," says Peter Morici, a professor at the University of Maryland's Smith School of Business in College Park. "The Fed should stop raising interest rates soon."

The next meeting, the last for Chairman Alan Greenspan, of the interest-rate-setting Federal Open Market Committee is scheduled for Jan. 31. The committee is expected to raise the influential federal funds target rate to 4.5% from its current 4.25%.

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