Consumer Prices Stagnate
Consumer prices climbed a meager 0.8% last year and declined in November and December on account of plunging oil prices. The slow pace of inflation may come as welcome news to American workers whose wages have stubbornly failed to grow despite a revived labor market. But the sluggishness does not bode well for overall economic health. And the report throws into doubt plans by the Federal Reserve to raise interest rates later this year.
Fed officials noted that inflation will rise to healthier levels once the energy sector stabilizes. "There will almost certainly be weak inflation readings early in the year influenced by energy prices,” Federal Reserve Bank of Atlanta President Dennis Lockhart said in a speech this week.“But once that influence has passed, I expect inflation to move toward the Fed’s targeted longer-term run rate.” A broad swath of economists and investors expects consumer prices to rise by 2% in the coming months.
