- Charles Evans, Federal Reserve Bank of Chicago President
Consumer prices in the world's number one economy dropped in December from a month earlier, posting the sharpest decline since April 2013. The Labor Department said the cost of living in the US fell by 0.4% month-over-month in December, following the 0.3% drop in the preceding months. On an annual basis, consumer prices cooled to 0.8% growth in the final month of 2014, considerably lower than the 1.3% increase in November, posting the weakest rate of growth since October 2009. Core inflation, which strips out volatile food and energy prices, was flat on month in December and rose 1.6% on an annual basis.
As long as inflation remains contained and the US Dollar strong, the deteriorating outlook could lead to speculation that the Fed could delay its first rate hike by couple of months. Federal Reserve Bank of Chicago President Charles Evans said the US might not reach the Fed's target inflation rate until 2018 and he does not support the idea of raising interest rates until 2016. "We ought to provide an appropriate amount of accommodation to hit the inflation goal," he said. Investors are examining the inflation data as the Fed gets ready to start normalizing monetary policy. Lacklustre wage growth at the end of 2014 coupled with cooling inflation is raising odds of a delay of the first interest rate hike.
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