WASHINGTON: A closely watched index of US inflation slowed in December as a spike in energy prices receded, according to government data published Monday.
The latest sign of weakening price pressures, which helped define conditions in major economies around the world in 2017, comes a day before the Federal Reserve is to begin its latest meeting on monetary policy.
The central bank expects to begin another cycle of interest rate increases this year after hiking three times in 2017, anticipating the long-awaited return of inflation -- which has so far failed to materialize despite a decade of job creation and falling unemployment.
The figures also showed that consumer spending slowed in December but remained robust, with spending by members of the public rising at the same rate as incomes.
The Personal Consumption Expenditures price index, the Fed's preferred inflation measure, slowed to 0.1 percent in December from November's 0.2 percent increase -- half the increase that analysts were expecting.
The 12-month measure, which compares gains in prices to those recorded in December of 2016, also slowed a tenth of a point to 1.7 percent, moving even further from the Fed's two percent target.
Energy prices appeared to lead the decline, falling 1.2 percent for the month, giving back some of November's 4.3 percent post-hurricane bounce.
Excluding volatile food and fuel categories, however, "core" PCE rose to a 0.2 percent increase from November's 0.1 percent. But this was no higher than October.
Year on year, core PCE held steady at 1.5 percent, the same as in November and down four tenths from the start of the year.
This important measure of inflation fell below the Fed's target in 2012 and has not surpassed it since.
Some analysts expect a pickup in the annual measure of inflation in the first half of this year, with price gains appearing stronger relative to weak costs in consumer goods recorded in the winter and spring of 2017.
But policymakers have been baffled by the extended run of low inflation, acknowledging that they may not fully grasp the reasons behind it.
In December, personal incomes rose by 0.4 percent, or $58.7 billion, while spending also rose 0.4 percent, or $54.2 billion.
This helped drive down the savings level to its lowest level in a decade at $351.6 billion.
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