Consumer prices fall as energy demand slumps

Deflation has been with us since about mid summer 2008. The Fed has embarked on a path to turn deflation into low-moderate inflation. My guess is by the fall the CPI will begin to turn up and will accelarate into 2010. The Fed runs the risk that all this monetary expansion will result in a high level of inflation in the next few years or even dreaded hyper-inflation.-Lou

Consumer prices fall as energy demand slumps

WASHINGTON (Reuters) - U.S. consumer prices fell unexpectedly in March and recorded their first annual drop since 1955, government data showed on Wednesday, as slumping demand pushed down energy and food costs.

The Labor Department said its closely watched Consumer Price Index fell 0.1 percent, after increasing 0.4 percent in February. Analysts polled by Reuters had forecast headline CPI rising 0.1 percent.

Core prices, which exclude food and energy items, rose 0.2 percent after rising by the same margin in February. That compared to analysts' prediction for a 0.1 percent increase. Core prices have risen by 0.2 percent for three months in a row. March core prices were lifted by increased costs for tobacco and vehicles.

On a year-over-year basis, consumer prices fell 0.4 percent in March, the first 12-month decline since August 1955, following a 0.2 percent increase the previous month. Core prices rose 1.8 percent year over year.
Energy prices dropped 3.0 percent after rising 3.3 percent the previous month. The food index eased 0.1 percent for a second straight month in March