Plunging gasoline costs led to the largest drop in consumer prices in six years last month and added another complication for Federal Reserve policymakers as they try to determine when to start raising interest rates, the Labor Department said Wednesday.
The Consumer Price Index declined 0.3 percent, much steeper than the 0.1 percent decrease economists had expected. The index was flat in October.
November was just the second time this year that the closely watched index fell and was the steepest decline since December 2008, the Labor Department said.
The report came as the central bank’s Federal Open Market Committee was preparing to issue its monetary-policy statement Wednesday following a two-day meeting.
Analysts said the Fed could signal that it is getting closer to raising its benchmark short-term interest rate from the near zero-percent level it has been at since late 2008.
But falling prices could give Fed policymakers pause.
The Consumer Price Index rose just 1.3 percent in the 12 months ended Nov. 30, well below the Fed’s 2 percent annual target.
The Fed uses a different inflation gauge, based on personal consumption expenditures, which has been running lower than the Consumer Price Index.
“Inflation is below the Federal Reserve’s target and is slowing as energy prices continue their unexpected decline,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
“Below-target inflation is complicating the Federal Open Market Committee’s task,” he said.
Gasoline prices were down 6.6 percent last month, more than double October’s decline, as global oil prices have fallen dramatically in recent months.
The drop in prices at the pump was the main factor in the large consumer price index decline, the Labor Department said.
The average price for a gallon of regular gasoline was $2.51 on Wednesday, according to AAA. That was down about 12 cents from a week ago and about 72 cents from a year ago.
Energy prices overall were down 3.8 percent last month, double October’s decline, the Labor Department said.
Food prices rose 0.2 percent in November after a 0.1 percent increase the previous month.
So-called core prices, which exclude volatile energy and food costs, rose 0.1 percent last month after a 0.2 percent increase in October. For the 12 months ended Nov. 30, core prices rose 1.7 percent.