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US inflation stays muted as chaotic 2020 ends

By AFP - Jan 13,2021 - Last updated at Jan 13,2021

The nozzle of a gas pump pumps fuel into a car at a gas station in Alhambra, east of downtown Los Angeles, on October 10, 2012 in California (AFP file photo)

WASHINGTON — The US economy saw little inflation in 2020 amid the disruptions caused by the coronavirus pandemic, with the final month of a year seeing only a slight increase as gasoline prices rose, according to government data released on Wednesday.

The consumer price index (CPI) increased 1.4 per cent for 2020, the Labour Department said in the report reflecting a year during which the economy plunged as the pandemic shut businesses nationwide.

That was down from the 2.3 per cent inflation in 2019.

Amid a still-tentative economic recovery, CPI rose 0.4 per cent in December, seasonally adjusted, in line with analysts' forecasts, accelerating from the 0.2 per cent increase in November, according to the report. 

However the "core" index excluding food and energy rose 0.1 per cent in December, and for 2020 the increase was 1.6 per cent — far below the central bank's 2 per cent goal.

Kathy Bostjancic of Oxford Economics said the muted reading means the Federal Reserve (Fed) is unlikely to soon change its commitment to keep interest rates low to spur employment and to continue buying tens of billions of dollars in bonds.

"The benign core inflation readings support our call that the Fed does not lift the policy rate from the effective lower bound until 2024," she said in an analysis.

The Labour Department said the December increase was driven by an 8.4 per cent surge in gasoline prices.

The food index, both for meals at home and away, rose 0.4 per cent.

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