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U.S. Consumer Prices Unchanged Amid Sharp Pullback In Gas Prices

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With a sharp pullback in gasoline prices offsetting increases in other prices, the Labor Department released a report on Wednesday showing consumer prices came in flat in the month of November.

The report said the Labor Department's consumer price index was unchanged in November after rising by 0.3 percent in October. The unchanged reading matched economist estimates.

The report said energy prices tumbled by 2.2 percent in November after jumping by 2.4 percent in October, as gasoline prices plunged by 4.2 percent after surging up by 3.0 percent in the previous month.

The Labor Department said the steep drop by the gasoline index was offset by increases in an array of indexes, including shelter and used cars and trucks.

Excluding the pullback in energy prices and a modest increase in food prices, core consumer prices edged up by 0.2 percent in November, matching the uptick seen in October as well as expectations.

The increase in core prices reflected the higher prices for shelter and used cars and trucks as well as increases in prices for medical care, recreation, and water and sewer and trash collection.

Meanwhile, the Labor Department said prices for wireless telephone services, airline fares, and motor vehicle insurance declined in November.

The report said the annual rate of consume price growth slowed to 2.2 percent in November from 2.5 percent in October, while the annual rate of core consumer price growth inched up to 2.2 percent from 2.1 percent.

While the annual rate of core price growth edged higher, Andrew Hunter, U.S. Economist at Capital Economics, said there was little to suggest that it will rise much further from here.

"The recent softening in core inflation won't prevent the Fed from raising interest rates again next week and, with real economic growth likely to remain above trend in the near term, we still expect two more 25bp rate hikes in the first half of next year," Hunter said.

He added, "But it does suggest that the Fed won't hesitate to move to the side-lines if activity growth begins to slow more sharply."

On Tuesday, the Labor Department released a separate report unexpectedly showing a modest uptick in producer prices in November.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in November after climbing by 0.6 percent in October. Economists had expected prices to be unchanged.

Excluding food and energy prices, core producer prices rose by 0.3 percent in November following a 0.5 percent increase in October. Core prices had been expected to edge up by 0.1 percent.

Despite the modest monthly increase, the report said the annual rate of producer price growth slowed considerably to an eleven-month low of 2.5 percent in November from 2.9 percent in October.

On the other hand, the annual rate of core producer price growth accelerated to 2.7 percent in November from 2.6 percent in October.

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