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Inflation beast at bay
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January 13, 1998: 9:14 a.m. ET
Overall consumer prices held in 1997 to their lowest increase in 11 years
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NEW YORK (CNNfn) - The beast of inflation was, if not tamed, at least held at bay not only for December, but also for the whole year of 1997, figures released by the U.S. Labor Department Tuesday show.
Overall, consumer prices rose just 1.7 percent during 1997, the lowest increase in 11 years. By comparison, prices rose 3.3 percent during 1996.
Labor's Consumer Price Index rose just 0.1 percent in December, the same nominal increase as in November and exactly in line with economists' forecast.
The news was also good regarding the so-called "core rate" which excludes the volatile food and energy sectors. The core rate edged up just 0.2 percent in December and 2.2 percent over the whole year, its smallest increase since 1965.
The outlook is for continued subdued inflation, said Philip Braverman, chief economist at DKB Securities, but there could still be concerns.
"What we are experiencing now is the best of all possible worlds, but it is an element of concern for the Federal Reserve that we don't spill over from inflation, moderate as it is, to outright deflation, which could be a very dangerous development," said Braverman.
The U.S. bond market also took a cautious approach. The price of the 30-year Treasury bond fell off after the news, dropping 10/32 with a yield of 5.72 percent.
A fall in energy prices was the main force behind the lower December prices, Labor said. Energy prices decreased 1.6 percent, held back by dropping oil prices because of the generally warm weather around the United States. In 1997, energy prices were down 3.4 percent.
Food prices were down 0.1 percent last month, with grocery food prices down 0.3 percent, reflecting declines in the prices for fruits, vegetables, meats and eggs. Over the entire year, food prices rose 1.5 percent, the lowest gain since 1992.
Food group prices declining over 1997 were pork, down 1.5 percent, poultry, down 1.6 percent, and dairy products, down 0.5 percent.
Coffee didn't need caffeine to give consumers a jolt in 1997. Its price jumped 16.9 percent over the course of the year.
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U.S. Labor Department
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