For all of 2015, consumer prices climbed 0.7 percent after rising 0.8 percent in 2014.
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It was the energy index leading the drop, with a 2.4% drop, versus a food index drop of 0.2%.
In the 12 months through December, the core CPI increased 2.1 percent, the largest gain since July 2012, after climbing 2.0 percent in November.
“Air fares are also the main reason why core inflation was much higher than expected”.
“The increase was led by improvements among the main groups with high weights: food & non-alcoholic beverages (+3.6 per cent); and housing, water, electricity, gas & other fuels (+2.5 per cent)”, it said.
The cost of many essentials such as shelter and medical care has been steadily increasing, even as prices for energy products and consumer goods have fallen.
The central bank’s preferred inflation measure was up 0.4% year-on-year in November, and core inflation, stripping out energy and food, increased 1.3%.
With Fed officials watching inflation expectations, financial market conditions tightening and economic growth appearing to have significantly slowed in recent months, the chances of another interest rate hike in March are diminishing.
Core consumer prices were projected to rise 0.2 per cent according to the median forecast in the Bloomberg survey of economists.
This morning is packed with the Consumer Price Index and USA housing starts, which will both be released at 8:30 a.m. ET. Fed Chairwoman Janet Yellen said in December that the impact of low oil prices on inflation could “wash out” if prices stabilized, but oil has continued its downward slide since then. Some economists say it could be June before the Fed raises rates again. Estimates ranged from little changed to a 0.3 percent advance. The Fed raised its benchmark overnight interest rate in December by 25 basis points to between 0.25 per cent and 0.50 per cent, the first hike in nearly a decade. Food prices fell for a second straight month, with meat, poultry, fish and eggs prices posting their biggest decline since August 1979.
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A strong dollar as well as an inventory bloat is dampening prices for some core goods. The price index for medical care services was up 2.9% in December from the same month a year ago. Permits for the construction of single-family homes rose 1.8 percent last month.
