U.S. consumer prices recorded their biggest decline in six years in December and a gauge of underlying inflation held steady, which could bolster the case for delaying the first interest rate increase from the Federal Reserve.
The Labor Department said on Friday its Consumer Price Index fell 0.4 percent last month, the largest drop since December 2008, after sliding 0.3 percent in November. In the 12 months through December, CPI increased 0.8 percent.
It was the weakest year-on-year reading since October 2009, and followed a 1.3 percent rise in November. Last month’s readings were in line with expectations.
U.S. Treasury debt prices held gains, while the dollar trimmed gains versus the euro and U.S. stock index futures pared losses.
“It seems nearly certain that further declines in headline inflation rates will be seen in coming months. What is important though is that core inflation rates are not necessarily immune to declines in oil and gasoline,” said Dan Greenhaus, chief strategist at BTIG in New York.
While Fed officials have viewed the energy-driven inflation weakness as transitory, a strong dollar is taming underlying price pressures, which could cause some discomfort.