Economic Report: Inflation flatlines in January thanks to lower gas prices, CPI shows

Consumer prices – aka inflation – have leveled off thanks to falling oil prices. That’s giving a financial boost to families and keeping the cost of borrowing down.

The numbers: The cost of consumer goods and services were unchanged in January largely thanks to falling gas prices, another sign inflation poses little threat to the economy right now.

The consumer price index was flat last month, the government said Wednesday. Economists polled by MarketWatch had forecast a 0.1% advance.

What’s more, the increase in the cost of living over the past 12 months slowed to 1.6% from 1.9%.

That’s the smallest gain in a year and a half, reflecting a downswing in inflation that began toward the end of last summer. The CPI was rising at an almost 3% rate as recently as July.

Another closely watched measure of inflation that strips out food and energy rose 0.2% last month. The yearly increase in the so-called core rate stood at 2.2% for the third month in a row.

What happened: Prices rose last month for rent, clothes, medical care and household furnishings.

Rising rents have been a particularly thorny issue, though there’s evidence they may be tapering off a bit amid a slowdown in the real estate market.

Those increases were offset by a decline in the cost of gasoline, new cars and trucks and plane tickets.

The cost of gasoline fell sharply toward the end of last year and continued to decline in early 2019. The cost of medical care and groceries have also been muted.

Lower inflation is giving a shot in the arm to American workers and their families.

Real or inflation-adjusted wages rose 0.2% in January to bring the yearly increase to 1.7%. The gains were an even stronger 2.1% for rank-and-file employees (bosses excluded). Those are the biggest increases since the middle of 2017.

The big picture: Waning inflation has persuaded the Federal Reserve to stop raising interest rates for the time being amid fresh worries about the economy’s future.

The U.S. is still growing, but it faces more headwinds from a global slowdown, trade tensions with China and turmoil in Washington that makes it harder for businesses and investors to plan.

Read: Inflation? What inflation? Falling price pressures clear runway for economy in 201

Also Read: Has the U.S. economy found a sweet spot? Job creation is soaring, but not inflation

Market reaction: The Dow Jones Industrial Average DJIA, +1.49% and S&P 500 SPX, +1.29% were to set to open higher in Wednesday trades. The mild reading on inflation in January is unlikely to sway investors much.

What they are saying? The 10-year Treasury yield TMUBMUSD10Y, +0.87% was little changed at 2.70%. Yields are well below a seven-year high of 3.23% set in October, however.

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