US inflation rate remains negative

Lady filling up her truck with petrol Image copyright AP

US inflation remained negative in January due to steep falls in the price of petrol, official figures have shown.

The Consumer Price Index fell by 0.7% in the month, and by 0.1% from a year earlier - the first annual drop in five years - the Department of Labor said.

Petrol prices fell by 18.7% in January. Had petrol prices remained stable, the index would have risen by 0.1%.

Earlier this week, US Fed Chair Janet Yellen said she expected inflation to start rising in the coming months.

Petrol prices were likely to stabilise as oil price falls began to moderate, she said. US rates have been close to zero since 2008.

Analysts said a short period of falling prices would do nothing to damage the US economy.

"The annual rate of inflation fell to -0.1%, which is technically a 'deflation,'" said Capital Economics.

"But this deflation is nothing to worry about. For a net importer of oil like the US, lower gasoline prices are a good thing".

Analysis: Andrew Walker, BBC World Service economics correspondent

Yes, this is deflation in one sense of the word, and it is a slightly more rapid decline in prices than in the eurozone. But it looks a lot less troubling.

Energy prices have been the key to taking the figure below zero for both economies. If you take out energy, food, alcohol and tobacco, the eurozone figure is a positive number, but still low at 0.6%.

The nearest US equivalent is 1.6%. Not high by any means, but consistent with the more robust current performance of the American economy, which also means there is more chance of inflation picking up soon.

The US figures do not feel like a warning sign of a period of entrenched deflation, a possibility that is worrying some policymakers in the eurozone.

The US economy is performing well, with growth in the final three months of 2014 coming in at 2.6% and unemployment falling.

But negative inflation is making it hard for the Fed to raise interest rates. Most analysts believe rates will begin to rise later this summer, or in the autumn.

Related Topics

Related Internet links

The BBC is not responsible for the content of external Internet sites