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US consumer prices falling by 0.1 percent

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by Peter Charalambous

US consumer prices have fallen by 0.1 percent last month, whilst the Federal Reserve forecasts indicate that inflation will continue to fall, as the consumer price index (CPI) decreased 0.1 percent compared with the 0.1 percent increase forecast by analysts.

In the 12 months between March 2008 and March 2009 prices have fallen by 0.4 percent which is the biggest fall in over 60 years.

The core prices index, excluding food and energy, increased by 0.2 percent after increasing again by that same amount in February as core prices have increased due to the costs of tobacco and cars.

It is the fall in both food and fuel costs which has bought overall prices lower as energy costs are down by 3 percent, whilst food is down by 0.1 percent, especially due to cheaper meat and dairy produce.

Policymakers are becoming increasingly concerned over the affects of deflation and the effects that it may have on economic growth in future.

Chief financial economist at the Bank of Tokyo-Mitsubishi stated that inflation is currently not the problem as consumer spending is falling rapidly, although with the economic downturn suppressing prices, the threat of deflation could in turn wipe out businesses and their future viability.

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News posted: April 15, 2009

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