Inflation Remains Tame

With housing prices continuing to drop sharply, U.S. core consumer prices fell a seasonally-adjusted 0.1% in January, the first decline since 1982, the Labor Department estimated Friday.

Core prices, which exclude food and energy costs, are considered a good indicator of underlying inflationary pressures. In January, prices fell for hotel fares, home ownership costs, new cars, airfares and clothing, leaving room for the Federal Reserve to keep supporting the economy with record-low interest rates.

Following continued improvements in financial markets, the Fed Friday raised the rate it charges banks for emergency loans. But in making the announcement Thursday, it reiterated that benchmark short-term rates are expected to stay near zero for several months to bolster the recovery.

Overall, the consumer price index rose a seasonally adjusted 0.2% in January for the fifth straight month, the government said. Higher energy and medical costs more than offset the largest decline in services prices since 1982.

In the past year, the CPI is up 2.6%, led by higher energy costs. The core CPI is up 1.6% in the past year. Shelter costs, which account for more than 40% of the CPI, are down 0.1% in the past year, largely due to the collapse of the housing market.

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