Prices Flat in November; Inflation Slowing Down

The inflation hawks at the Federal Reserve have reason to be giddy today: the U.S. Labor Department announced this morning that consumer prices were flat in November, against the expectations of economists and analysts who had predicted moderate increases in consumer prices.

Both the Consumer Price Index (CPI) and the core CPI – a measure of consumer prices that excludes food and energy prices – did not move at all last month.  Economists had predicted both to increase 0.2%.  The core CPI reading was the lowest since June 2005, the general beginning of the high-inflation period the economy has been experiencing.

Victory bells could be heard all over Wall Street as economists declared the end of near-term inflation risks with the fervor of George W. Bush astride an aircraft carrier.

"The inflation scare of 2006 is over," wrote Kenneth Beauchemin, an economist for Global Insight, in a note to investors.

Lower energy and automobile prices offset a rise in the prices for homeownership and medical care last month.  Food costs fell 0.1%, clothing costs were down 0.3%, and transportation costs were down 0.9%, including a 4.8% decrease in airfares, the largest drop in seven years.

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