U.S. consumer prices rose in December, their fastest rate in nearly two decades led by higher energy, food and medical prices causing economic growth to slow, the Labor Department reported Wednesday.
The consumer price index rose 0.3 percent in December, the Labor Department said today in Washington. The increase was more than expected but also marked a slowdown from an 0.8 percent rise in November. The core CPI, which excludes volatile food and energy prices, advanced 0.2 percent.
Price pressures have been mounting this year, driven by significant increases in the cost of oil and food. Prices rose at a 5.6 percent annual rate in the final three months of 2007 with energy prices jumping at a 37 percent annual rate.
Over all, inflation rose by 4.1 percent in 2007, the highest rates in 17 years. Economists focus on the core figure, which removes the volatile costs of food and energy and provides a better sense of inflation's effect on the whole economy.
Core inflation rose 0.2 percent in December and 2.4 percent for the year, slightly above comfortable levels but still relatively manageable.
Federal Reserve officials said they are supervising inflation levels as they consider a fourth consecutive cut to the benchmark federal funds rate. Greater economic activity is stimulated by lower interest rates, but can also contribute to rising prices. Top Fed officials are next scheduled to meet on Jan. 29 and 30 to consider economic conditions and monetary policy.
The December report does suggest that the purchasing power of American workers is steadily being eroded. Energy prices last month increased 0.9 percent compared to November, with gasoline prices rising 1.1 percent and electricity prices down 0.2 percent, according to the report.
Medical-care prices, meanwhile, increased 0.3 percent, while food and beverage prices were unchanged following several solid monthly gains. Clothing prices were up a decent 0.2 percent after jumping 0.8 percent the previous month.
Transportation prices rose 0.5 percent on the month, while airline prices rose 1.6 percent reflecting the secondary effects of higher energy prices. New vehicle prices were left unchanged.
More rate cuts are expected over the next few months.