US inflation drops as gasoline prices plunge

US consumer prices fell in November due to a sharp drop in gasoline prices at the pump, the government said Friday.

The consumer price index fell 0.3 percent from October, the first decline in CPI since May, the Labor Department said

A steep 7.4 percent decline in the gasoline index more than offset increases in all the other indexes, the department said.

Overall energy prices fell 4.1 percent, despite rises in prices for natural gas and electricity. The energy index, though volatile on a monthly basis, showed only a modest 0.3 percent rise from November 2011.

Food prices meanwhile rose 0.2 percent from October.

Excluding food and energy prices, core CPI edged up 0.1 percent following a 0.2 percent increase in October.

The data underscored the tame inflationary pressures in the weak economy that is still struggling to recover from the severe 2008-2009 recession.

Year-over-year, CPI rose 1.8 percent in November, slowing from a 2.2 percent rise the prior month.

Core CPI edged down to 1.9 percent.

The Federal Reserve this week said it would keep its benchmark interest rate at 0-0.25 percent, where it has been for the past four years to support the recovery, as long as the unemployment rate is above 6.5 percent and the inflation outlook is below 2.5 percent.

"The Fed's inflation guide, the PCE deflator, is running even lower than CPI inflation, at 1.7 percent year-over-year in October. That's below the 2.0 percent target, meaning policymakers will retain a laser-like focus on reducing the unemployment rate," said Sal Guatieri of BMO Capital Markets.

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