US consumer prices expected to show slight drop in October

Economic Indicators Associated Press

The Labor Department reports on October consumer prices. The report will be released at 8:30 a.m. EST Thursday.

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PRICES DOWN: The expectation is that consumer prices dipped 0.1 percent in October, according to a survey by data firm FactSet, and that core inflation, which excludes volatile food and energy costs, will show a small 0.1 percent rise.

INFLATION LOW: In September, U.S. consumer prices edged up 0.1 percent with the overall increase held back by a third straight monthly decline in gasoline prices.

The tiny September gain was the latest evidence that inflation remains benign.

Over the 12 months ending in September, both overall and core prices are up 1.7 percent. The increases are well below the 2 percent target for inflation set by the Federal Reserve. The modest inflationary pressures have allowed the central bank to keep interest rates at a record low for the past six years to help the economy recover from the worst recession since the 1930s.

Inflation, already low, has moderated even more in recent months, helped by the declines in energy costs and a stronger dollar, which makes foreign goods cheaper for U.S. consumers.

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Analysts expect these inflation trends to continue depressing prices, giving the Fed more room to hold a key interest rate at an all-time low. Many economists don't expect the Fed to start raising interest rates until the middle of next year.

The plunge in global oil prices has already pushed pump prices down. The AAA reports that the nationwide average for gas is below $3 per gallon. It is currently at $2.86, down from $3.11 a month ago.

Earlier this week, the government reported that inflation at the wholesale level increased 0.2 percent in October with the price that U.S. companies received for new cars, beef, pork and pharmaceuticals all rising last month even though wholesale gas prices fell 5.8 percent.