CPI points to soft inflation for US

The Labor Department said on Wednesday its Consumer Price Index was unchanged last month, held back by a drop in gasoline prices. The reading was in line with analysts' expectations in a Reuters poll.

Last month, the Fed said it would keep interest rates near zero at least until the jobless rate falls to 6.5 percent, as long as the central bank believes inflation will stay below 2.5 percent.

Wednesday's data reinforced the view that inflation will not hit the Fed's threshold anytime soon.

“This leaves Ben Bernanke and the Fed with a free hand to continue with ultra-accomodative monetary policy.” said Michael Woolfolk, a currency strategist at BNY Mellon in New York.

Stock investors, however, appeared to shrug off the data. Prices for U.S. stock index futures slipped, with shares of Boeing set to weigh on the market after two Japanese airlines grounded their Dreamliner fleets.

To boost growth and get Americans back to work in the wake of the Great Recession, the Fed has kept interest rates near zero since late 2008 and has bought some US$2.5 trillion in assets.

Some economists think steady improvement in the labor market could at least lead the Fed to curtail its asset-buying program by the end of this year.

Weak inflation helped consumers increase their purchasing power last month. Inflation-adjusted weekly earnings rose 0.6 percent, the Labor Department said in a separate report.

Gasoline prices fell 2.3 percent, marking the third straight monthly decline.

Away from gasoline and food, the cost of apparel fell 0.1 percent. New motor vehicle prices were flat.

Prices for used cars and trucks fell 0.4 percent, declining for a sixth straight month. Housing costs edged up, with owners' equivalent rent of primary residences rising 0.1 percent.

The Fed does not use CPI to target inflation, and instead uses an index released by the Commerce Department. The two indexes usually track one another quite closely.

By either measure, annual inflation remains below the Fed's 2 percent target.

In the 12 months to December the CPI increased 1.7 percent, the smallest increase since August. That compared to November's 1.8 percent rise.

Industrial Output Rises In December but Utilities Slump

Industrial output rose in December and motor vehicle assembly picked up, suggesting the manufacturing sector continues to expand at a moderate pace.

Industrial production increased 0.3 percent last month after a 1.0 percent increase in November, the Federal Reserve said on Wednesday. The gain was in line with economists' expectations.

Manufacturing production increased 0.8 percent in December after advancing 1.3 percent the prior month. Automobile assembly increased from November's pace.

For the fourth quarter, industrial production rose at a 1.0 percent annual pace. Manufacturing output increased at a tepid 0.2 percent pace during the October-December period.

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