Consumer prices up 2% for the year

NEW YORK (CNNMoney.com) -- A key index of consumer prices fell in May, but it was up 2% over the past 12 months, the government said Thursday.

The Consumer Price Index, the Labor Department's key measure of inflation, fell by 0.2% in May on a monthly basis. Economists surveyed by Briefing.com expected a 0.1% drop.

The government report attributed most of the month-to-month decline to the energy index, which fell by 2.9% in May. The gasoline index fell by 5.2% in May, and was down 27% over the year.

"Up to this point, the U.S. economy has been the beneficiary of an 'inflation-less' recovery," said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors, in a research note.

"While [some] point to the risk of inflation down the road," he added, "there is still sufficient slack in the economy to keep price levels from moving higher."

Core CPI and inflation: The closely watched core CPI, which excludes volatile food and energy prices, ticked up by 0.1% in May after being unchanged in April. That matched economists' expectations.

It was only the second monthly increase in core CPI so far this year. The rate is down by 0.9% over the previous 12 months.

"The core inflation rate remains uncomfortably low," Baird said. "The economy may be expanding, but at a pace that isn't inspiring."

The core rate is a gauge of inflation. Experts say concerns are sparked only when core CPI rises consistently by 0.2% or more each month.

"Muted inflation, and the risk of deflation, seems likely to provide the Fed continued incentive to maintain its accommodative stance," Baird said.