By Sarah Chaney 

WASHINGTON -- U.S. consumer inflation wrapped up 2019 on a soft note, complicating the outlook for Federal Reserve officials who are watching for a meaningful pickup in prices.

The consumer-price index -- which measures the costs of everyday goods and services from food to dental care -- increased 2.3% in December from a year earlier, up from the 2018 increase of 1.9%. That mainly appeared to reflect a sharp rise in gasoline prices over the year. Prices excluding food and energy increased 2.3% in December from a year earlier, a touch higher than in 2018 but down from 2.4% in September.

Shelter prices, which were up 3.2% last year, matched the previous two years. Apparel prices fell for the sixth straight year in 2019. Prices for used vehicles were also down for the year.

"Inflation remains extremely well contained," said Michelle Girard, chief U.S. economist at NatWest Markets. "If we continue to see benign inflation, or even more worrisome, if inflation cools from here in 2020, that could be a trigger for rate cuts."

The Federal Reserve cut interest rates three times last year, in part to buffer the U.S. economy against slowing global growth. It has signaled it will hold rates steady but intends to closely monitor risks to the economy.

Muted inflation is a worry for the Fed because it could portend slowing economic demand. Fed officials follow the consumer-price index for clues about the trajectory of inflation. The central bank's inflation target of 2% is tied to a separate measure, the Commerce Department's price index for personal-consumption expenditures. PCE inflation tends to be lower than CPI and has been running below target. That reading will be released at the end of January.

Fed officials generally expect inflation will move up as labor markets tighten, according to the most recent Fed meeting minutes. So far, though, as some Fed officials noted, tighter labor markets over the past couple of years haven't exerted strong upward pressure on prices.

Economists cite several potential reasons behind muted price gains, such as companies having less pricing power because of globalization and consumers' growing tendency toward online comparison shopping.

Write to Sarah Chaney at


(END) Dow Jones Newswires

January 14, 2020 12:19 ET (17:19 GMT)

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