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Wednesday 26th of May 2010
March 18, 2010    

US consumer prices unchanged in February

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by Kay Murchie

The Labor Department today revealed the world’s largest economy appears to be under no inflationary pressure as consumer prices remained flat in February, as widely expected.

According to the Labor Department, the consumer price index remained unchanged during the month, although prices were 2.1% higher than in February 2009.

Meanwhile, core inflation, which excludes food and energy costs, saw a gain of 0.1%.

The news comes just a few days after the US Federal Reserve elected to keep interest rates at the historically low level of between 0% and 0.25%.

After the one day meeting, the Federal Open Market Committee (FOMC) voted 9-1 to keep rates unchanged.

Interest rates in the US have been at the low level since December 2008 and the bank has previously said that as a result of subdued inflation and high unemployment, low interest rates are required for “an extended period”.

Many analysts are not expecting a rate increase until the latter half of this year and today’s figures will reinforce this.

However, should the current trend continue, the core rate could fall below the Fed’s target of 1% to 2% for the first time since 1963, which has raised concern about deflation.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

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