Inflation still low as wholesale prices fall for 3rd straight month

WASHINGTON -- Wholesale prices dropped in November for the third straight month, indicating that inflation remains in check as Federal Reserve officials consider reducing a key stimulus program.

The Labor Department said Friday that its producer price index fell 0.1% from the previous month. The decline, which was in line with analyst expectations, was driven by a 0.4% drop in the price index for energy.

November's drop in wholesale prices followed a 0.2% decline in October and 0.1% in September.

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During the previous 12 months, wholesale prices rose 0.7%. That figure was up from a 0.3% 12-month rate through October, but remained well below the Fed's target of 2% annual inflation.

Central bank policymakers rely on a different inflation measure based on prices for personal consumption expenditures. But the latest 12-month figure for that gauge, through October, also was 0.7%.

"Price pressures continue to abate amid tepid domestic demand and a still-fragile economy," said Lindsey M. Piegza, chief economist at Sterne Agee.

The low inflation rate lessens pressure on Fed policymakers to start scaling back their bond-buying stimulus program, she said.

Some analysts think the Fed could start tapering the $85 billion in monthly bond purchases at next week's meeting after a surprisingly strong November jobs report.

A major fear about the program, begun in September 2012 to spur hiring by lowering long-term interest rates, has been that it would spark inflation. So far, that hasn't happened.

"With inflation in check the Fed can keep the focus on the labor market, which has yet to signal clear sustainable momentum," Piegza said.

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