Annual inflation rate at 0%, consumer prices rise 0.3% in January

Diving energy prices drove U.S. consumer prices flat over the past 12 months, marking the lowest inflation rate in more than a half a century, the Labor Department reported Friday. However, energy costs have been ticking upward of late and pulled consumer prices back up in January.

"A bit of inflation is encouraging," Mark Zandi, chief economist at Moody’s Economy.com, was quoted on NYTimes.com. "It means businesses aren’t completely giving up and slashing prices. The fact that they can at least hold the line on their price cuts is a positive."

The Consumer Price Index (CPI), the most closely watched gauge for inflation, rose 0.3% in January following an adjusted 0.8% slide in December. The increase was in line with market expectations and the first positive advance in six months. Still, most economists believe prices will again decline.

"We’re in the heart of the recession right now, and with demand falling rapidly, we can expect downward pressure on prices," Chris Rupkey, chief financial economist in New York at Bank of Tokyo-Mitsubishi UFJ Ltd., was quoted on Bloomberg.com. "Everything is heading in the same direction, which is down. Sales are down, profits are down, prices are coming down."

More and more economists are now focusing on the dangers of continual, out of control falling prices, known as deflation. Even the Federal Reserve has discussed the risks. (See Long-term inflation target set… and Deflation a key risk in 2009…) Continue reading Annual inflation rate at 0%, consumer prices rise 0.3% in January

Inflation rates and figures updated for Feb. 2009

Consumer prices were flat over the past 12 months, according to the latest data from the Bureau of Labor Statistics (BLS) provided on Friday, Feb. 20. The annual inflation rate is hovering right at 0%, marking the lowest level since 1955.

The US Inflation Calculator is updated with the newest government information, as are the following pages:

Consumer Price Index Data from 1913 to 2009

Current Inflation Rates: 1999-2009

Historical Inflation Rates: 1914-2009

Annual Averages for Rate of Inflation

For an in depth look at January consumer prices, follow Annual inflation rate at 0%…

Producer prices rise 0.8% in January, higher than expected

Producer prices rose 0.8% in January, reversing a five-month trend due to increased costs in energy, according to a Labor Department report released Thursday.

The Producer Price Index (PPI), which measures prices at the factory door and inflation pressures before they reach the consumer, topped forecasts that projected a climb from 0.3% and 0.4%. Many economists tend to think the price increases are temporary.

"It is doubtful that the price increases will be able to stick given the weakening economy and rising unemployment," said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who projected wholesale prices would rise 0.9 percent. While "inflation hasn’t collapsed yet, the big concern still is that inflation will fall too much," he said.

Some Federal Open Market Committee (FOMC) members — who set federal fund interest rates — agree. Continue reading Producer prices rise 0.8% in January, higher than expected

Long-term inflation target of 1.7% to 2% set by Fed

The U.S. economy has weakened further and a gradual recovery in economic activity isn’t expected until later this year, Fed policy makers agreed, according to minutes released Wednesday and taken during the closed-door Federal Open Market Committee (FOMC) meeting Jan. 27-28.

The committee also noted their outlook had significant "downside risks," and provided a set of informal long-term economic projections, including that of inflation at 1.7% to 2%. After the meeting, the FOMC held the federal funds rate to a range of between 0 to 0.25%, as it first set in December, and concluded low interest rate levels would need to be kept for some time.

The released minutes make it clearer, however, how some members see the potential for excessive disinflation in 2009, or a deflation risk as St. Louis Fed’s Bullard addressed in a speech Tuesday. Deflation is a persistent decrease in general prices, or the opposite of inflation. Continue reading Long-term inflation target of 1.7% to 2% set by Fed

Deflation a key risk in 2009, argues St. Louis Fed President James Bullard

Further disinflation and a possibly "deflationary trap" is a key "near-term risk" for 2009, said James Bullard, president of the St. Louis Federal Reserve Bank, on Tuesday during a speech in New York. Bullard warned,

"Expectations of deflation for the next five years may feed into real interest rates, driving real rates higher just at the time monetary policy would like to move them lower."

Deflation is a persistent decrease in general prices, or the opposite of inflation. Falling prices may seem like good news for consumers, but only to a certain point. If prices mark sustained deflationary levels that strike below the cost to produce goods and services, further economic turmoil can ensue with production cuts, payroll reductions and deepening unemployment. Deflation can intensify debt by making it more expensive, cripple equity and widen home foreclosures.

Bullard addressed the New York Association For Business Economics where he said the recession would likely continue at least to the first half of 2009, and that there is a risk for sustained disinflation and a possible deflationary cycle similar to what the Japanese experienced after 1990. Continue reading Deflation a key risk in 2009, argues St. Louis Fed President James Bullard

US inflation set to rise to 200%?

Inflation has steadily declined for the last several months as energy prices have plunged, helping to curtail consumer costs. The inflation trend, however, could be heading the other way according to some economists.

Their worry is that current policy and massive government spending from the $800+ billion stimulus package will eventually lead to staggering inflation.

But 200% inflation? Marc Faber, author of the Gloom, Doom & Boom report, was asked that very question by CNBC’s "Asia Squawk Box." Faber’s response: Continue reading US inflation set to rise to 200%?