The Labor Department reported that the Consumer Price Index, a key measure of retail prices, was up 0.3% in January after declining 0.8% in December. The boost in the index was due to a 1.7% rise in energy prices for the month, as we saw the price of oil and gas increase slightly.
January's seasonally adjusted number was in line with analysts expectations and at first glance indicates that inflation is slowly creeping back into the market, however most economists feel the weight of the troubled economy will keep inflation in check in the near future. In fact, the annual rate of inflation has been reported to be the lowest since 1955 and despite the slight gain in energy prices in January, energy has seen an overall 20% price decline over the past year, putting this month's 1.7% gain in better perspective.
Consumer prices saw a steep decline at the end of 2008 as a result of the broader credit crisis. Curbed consumer spending and unemployment pushed retail prices down, triggering concerns of deflation. Despite slashing interest rates to zero, The Federal Reserve may be forced to be more aggressive in its efforts to help the struggling economy in 2009.