A sharp drop in gasoline
costs led U.S. consumer prices to tumble in April by the most in
over four years, while a gauge of underlying inflation was so
weak it could worry the U.S. Federal Reserve.
   The Labor Department said on Thursday its Consumer Price
Index slipped 0.4 percent, the biggest decline since December
2008 when America was suffering some of the darkest days of its
financial crisis. Analysts had expected a more modest 0.2
percent decline in last month's prices.
   The signs of muted inflation pressures could bolster the
case for the Fed to remain on its very easy monetary policy
path, despite divisions among policymakers over money printing
to buy bonds.
   In the 12 months through April, consumer prices rose 1.1
percent. That is well below the Fed's 2 percent inflation goal.
The U.S. central bank targets a different gauge of prices that
tends to run cooler than the Labor Department's index.
   Much of April's decline in prices was fueled by an 8.1
percent dive in gasoline costs, the biggest decline since
December 2008.
   However, the weakness in the index also extended to a
measure of underlying inflation that strips out volatile energy
and food prices.
   That gauge rose just 0.1 percent, and was up only 1.7
percent from a year earlier. Apparel prices dropped 0.3 percent.
   The annual reading for core inflation was at its lowest
since June 2011 and could stoke concerns over cooling demand in
the U.S. economy, or perhaps even the risk of outright
deflation.
   Most economists and investors don't think deflation is very
likely for America in the coming years, but it would be a
central banker's nightmare. Deflation involves spiraling
declines in prices and wages and is difficult for policymakers
to combat.