US consumer prices drop on cheaper gasoline

U.S. consumer prices fell unexpectedly in October, largely due to cheaper gasoline, and the annual inflation rate was the lowest in four years, the government said in a report that provided further evidence of a tame inflationary environment. The Labor Department reported that its consumer price index (CPI) fell 0.1 percent last month, following a 0.2 percent gain in September. The October decrease was primarily due to a sharp 2.9 percent drop in gasoline costs, the biggest since April. In the 12 months ending in October, the CPI increased only 1 percent, the smallest gain since autumn 2009, and well below the Federal Reserve's (Fed's) inflation target of 2 percent. Excluding volatile energy and food costs, so-called core CPI rose 0.1 percent in October - advancing by the same margin for a third consecutive month - and increased 1.7 percent over the past 12 months. Weak domestic demand is keeping inflation contained. The absence of inflation in the economy suggests the Fed likely will continue its monthly $85 billion bond-buying program at least through early 2014 as it tries to stimulate demand by keeping interest rates low.