Consumer Prices Post Biggest Drop in Over 3 Years

Consumer prices fell in May by the most in over three years as households paid less for gasoline, possibly giving the U.S. Federal Reserve more room to help an economy that is showing signs of weakening.

The Labor Department said on Thursday its Consumer Price Index dropped 0.3 percent last month after being flat in April. May's decline was the sharpest since December 2008 although analysts polled by Reuters expected a bigger decline.

Outside the volatile food and energy category, inflation pressure appeared to be modest. Core CPI climbed 0.2 percent higher as expected, matching the increase posted in April.