Washington, DC, January 18, 2007--Consumer prices rose a seasonally adjusted 0.5% in December, the first increase since August, the Labor Department reported Thursday.
Excluding food and energy prices, the core CPI rose 0.2% in December, the biggest increase in three months.
The increases in the CPI and the core CPI were exactly as forecast by the median estimate of economists.
The CPI had been flat in November and had fallen 0.5% in both September and October as energy prices plunged. Energy prices bounced higher in December, however, before turning lower again more recently.
In 2006, the CPI rose 2.5% after a 3.4% gain in 2005. The core CPI rose 2.6% in 2006 after 2.2% in 2005. It was the highest core inflation since 2001's 2.7%.
The CPI report is not likely to have much impact on deliberations by the Federal Open Market Committee on Jan. 30 and 31. Fed officials have said they believe inflation is still too high, but expect inflation to moderate over time as the economy cools slightly.
Most analysts expect the Fed to keep its overnight interest rate target at 5.25% for several more months at least before a possible rate cut sometime this year. Much will depend on the path of growth and inflation.
Energy prices rose 4.6% in December after falling the three previous months. Gasoline prices rose 8% after seasonal adjustment. Natural gas prices rose 3.9%. For all of 2006, energy prices rose 2.9% after surging 17% in both 2004 and 2005.
Shelter prices, which represent about 30% of the CPI, rose 0.3% in December. Rent of primary residence rose 0.5%, while owners' equivalent rent increased 0.3%.
Transportation prices rose 1.8%, led by higher fuel prices. New and used vehicle prices fell 0.3%.
Medical care prices rose 0.1%, as prescription drug prices fell 0.5%.
Apparel prices rose 0.6%, the first increase in three months. Apparel prices rose 0.9% in 2006.
Food prices were unchanged in December and rose 2.2% in 2006. In sharp contrast to the producer price index, which showed wholesale fruit and vegetable prices surging more than 20%, the CPI reported falling fruit and vegetable prices at the retail level.
Tobacco prices rose 1.5%. Recreation prices fell 0.3%. Education and communication prices rose 0.2%.
