Consumer Price Index Flat

The consumer price report has been easy for forecasters to predict: consistently flat. Overall prices, for a third straight month, were unchanged in January with the core rate up 0.2 percent for a fifth straight month. The headline year-on-year rate, reflecting energy effects, is moving lower, down 4 tenths to 1.6 percent though the core rate, which excludes energy as well as food, is steady at 2.2 percent. Together, the rates are right where the Federal Reserve wants them to be, straddling the 2 percent target.

Energy prices extended their steep decline to three months in a row, down a month-to-month 3.1 percent with gasoline down 5.5 percent. Year-on-year energy is down 4.8 percent with gas down 10.1 percent. November's collapse in oil from $70 to $50 has been pulling down inflation in general.

Transportation costs in general, reflecting weak energy prices, also fell steeply for a third straight month, down 1.3 percent with airfares down 0.9 percent. Otherwise consumer prices generally posted small gains with both housing and medical costs as well as food rising only 0.2 percent. New vehicle prices also rose 0.2 percent with used cars up only 0.1 percent. Education rose 0.3 percent with both communication costs and prescription drugs unchanged.

Apparel prices were flat during the shopping months of November and December but did pop 1.1 percent higher in January though the yearly rate is nearly dead flat, up 0.1 percent.

The U.S. economy is strong and demand in the labor market appears to be well exceeding available capacity yet prices at the consumer level, now held down by low oil prices, remain very tame in what is the theme of this economic expansion and is giving the Federal Reserve the luxury to step back from further rate hikes.