Economy

Inflation Rate Slowed Sharply In 2012; Prices Were Flat In December

The cost of a gallon of gas kept rising last year, but not at the torrid pace of 2010 and 2011. That helped keep inflation in check. i i

hide captionThe cost of a gallon of gas kept rising last year, but not at the torrid pace of 2010 and 2011. That helped keep inflation in check.

Joe Raedle/Getty Images
The cost of a gallon of gas kept rising last year, but not at the torrid pace of 2010 and 2011. That helped keep inflation in check.

The cost of a gallon of gas kept rising last year, but not at the torrid pace of 2010 and 2011. That helped keep inflation in check.

Joe Raedle/Getty Images

Consumer prices rose just 1.7 percent in 2012, the Bureau of Labor Statistics reports. That's about half the pace of 2011 — when prices went up 3 percent.

In December, BLS says, prices were unchanged.

One major reason inflation slowed last year: Gas prices went up just 1.7 percent, after gains of 13.8 percent in 2010 and 9.9 percent in 2011. Also, food costs rose 1.8 percent. BLS says that was "a deceleration" from the 4.7 percent increase in 2011.

As Reuters writes, the news that inflation remains in check "should help give the Federal Reserve room to prop up the economy by staying on its ultra-easy monetary policy path." In other words, there's no reason to think the Fed will need to start pushing up short-term interest rates anytime soon.

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