Prices Flat in November; Inflation Slowing Down

The inflation hawks at the Federal Reserve have reason to be giddy today: the U.S. Labor Department announced this morning that consumer prices were flat in November, against the expectations of economists and analysts who had predicted moderate increases in consumer prices.

<!–SPOTLIGHT–>

Both the Consumer Price Index (CPI) and the core CPI – a measure of consumer prices that excludes food and energy prices – did not move at all last month.  Economists had predicted both to increase 0.2%.  The core CPI reading was the lowest since June 2005, the general beginning of the high-inflation period the economy has been experiencing.

Victory bells could be heard all over Wall Street as economists declared the end of near-term inflation risks with the fervor of George W. Bush astride an aircraft carrier.

"The inflation scare of 2006 is over," wrote Kenneth Beauchemin, an economist for Global Insight, in a note to investors.

Lower energy and automobile prices offset a rise in the prices for homeownership and medical care last month.  Food costs fell 0.1%, clothing costs were down 0.3%, and transportation costs were down 0.9%, including a 4.8% decrease in airfares, the largest drop in seven years.