Decline in US consumer prices was entirely due to a massive fall in gasoline prices: Capital Economics

Quotes from Capital Economics

- The 0.7% m/m decline in US consumer prices was entirely due to a massive 18.7% m/m fall in gasoline prices. As a result, the annual rate of inflation fell to -0.1%, which is technically a "deflation". 

- But this deflation is nothing to worry about. For a net importer like the US, lower gasoline prices are a good thing. Moreover, with the real economy doing well, there is little danger that this temporary bout of falling energy prices will develop into a more insidious debt-deflation spiral.

- The annual rate of core inflation was unchanged at 1.6%. Admittedly, that is still below the Fed's 2% target, but it is currently being depressed by the indirect pass-through of lower energy prices and the stronger dollar. As those effects fade, core inflation should rebound to 2% early next year.