The cost of living was little changed in December, capping the third-smallest annual gain in the past decade, indicating U.S. inflation remains low.
The unchanged reading in the consumer-price index matched the median estimate of 83 economists surveyed by Bloomberg and followed a 0.3 percent drop the prior month, Labor Department data showed Wednesday in Washington. Costs rose 1.7 percent in 2012, down from a 3 percent increase in 2011.
Price increases will probably remain restrained as retailers use discounts to attract customers and budget battles in Washington hurt confidence, analysts said. Federal Reserve policymakers are likely to maintain unprecedented easing measures while inflation holds below their target level and absent further progress on reducing joblessness.
“There’s nothing to worry about on the inflation front” so the Fed will continue easing measures, said Bricklin Dwyer, an economist at BNP Paribas in New York, who correctly projected the December price readings. “We’re seeing weaker domestic demand playing into weaker price pressures.”
Bloomberg survey estimates for the consumer-price index ranged from a drop of 0.2 percent to an increase of 0.3 percent.
Consumer prices rose 2.4 percent on average over the past decade.
The core index, which excludes volatile food and energy costs, climbed 0.1 percent for the fifth time in the last six months. For 2012, core prices rose 1.9 percent compared with a 2.2 percent advance in 2011. Last year’s gain matched the average increase over the past 10 years.
The Fed’s preferred price measure, which is tied to consumer spending patterns, rose 1.4 percent in the 12 months to November, according to data from the Commerce Department.
Central bankers in December adopted a more flexible approach to their interest-rate outlook, saying borrowing costs will stay low “at least as long” as unemployment remains above 6.5 percent and if the Fed predicts inflation of no more than 2.5 percent one or two years in the future. That language replaced an earlier link between the rate outlook and calendar dates. Unemployment was 7.8 percent in December and November.
“For the next few years, it’s unlikely that we’re going to see inflation really push up above that 2 percent level,” that is the Fed’s longer-term goal, said Daniel Silver, an economist at JPMorgan Chase & Co. in New York, before the report was released.
Earlier this week, Fed Chairman Ben S. Bernanke tried to assuage investors that the central bank will remain vigilant against any flare-up in prices.
“There seems to be a pretty strong presumption that we should be aggressive in monetary policy,” he said at the University of Michigan’s Gerald R. Ford School of Public Policy in Ann Arbor, Mich. “We will be paying very close attention to make sure that inflation stays well-contained as it is today.”
The core measure last month was restrained by declines in the cost of used cars, clothing and medicinal drugs.
Tepid global growth and falling energy costs, including cheaper gasoline, are mitigating inflation risks. Energy costs decreased 1.2 percent in December. Gasoline fell 2.3 percent.
Fuel costs so far this year have held near a 2012 low reached in December. A gallon of regular gasoline at the pump dropped to a $3.30 average on Jan. 14, close to the $3.22 reached on Dec. 19 that was the lowest in a year, according to AAA, the biggest U.S. auto group.
Low fuel prices may help Americans’ buying power even as higher taxes restrain their discretionary spending. The fiscal pact passed by Congress on Jan. 1 allowed the payroll tax used to pay for Social Security benefits to return to the 2010 level of 6.2 percent from 4.2 percent. That reduces the paycheck by about $83 a month for someone who earns $50,000.
A separate report from the Labor Department on Wednesday showed wages adjusted for inflation climbed 0.3 percent on average in December after increasing 0.6 percent the prior month. For all of 2012, they were up 0.3 percent.
The CPI is the broadest of three monthly price measures from the Labor Department because it includes goods and services. About 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.