US consumer prices slide by most in six years thanks to cheap gas

U.S. consumer prices recorded their biggest drop in nearly six years in November as gasoline prices tumbled, but this probably will do little to change views the Federal Reserve will start raising interest rates in mid-2015.

The Labor Department said on Wednesday its Consumer Price Index fell 0.3 percent last month, the largest decline since December 2008, after being flat in October.

In the 12 months through November, the CPI increased 1.3 percent, the smallest gain since February, after advancing 1.7 percent in October.

Wall Street had forecast the CPI slipping only 0.1 percent from October and rising 1.4 percent from a year ago.

Underlying price pressures are also ebbing a bit after showing some signs of creeping up in October.

Stripping out food and energy prices, the so-called core CPI edged up 0.1 percent after rising 0.2 percent in October. In the 12 months through November, the core CPI rose 1.7 percent after increasing 1.8 percent in October.

The Fed targets 2 percent inflation and it tracks an index that is running even lower than the CPI.

Plunging crude oil prices, which hit a fresh 5-1/2 year low this week on increased shale production in the U.S. and slowing global demand, are keeping overall inflation in check for now.

While inflation is trending lower, job growth has shifted into higher gear and the pace of slack absorption in the economy has accelerated in recent months.

That has left many economists to expect the U.S. central bank could signal its intention for a mid-2015 interest rate hike when officials end a two-day meeting later on Wednesday.

Such a signal could come through changes to the Fed's so-called forward guidance on rates and new economic projections.

Low inflation could still urge caution for the Fed, which has kept its short-term interest rate near zero since December 2008.

Gasoline prices fell 6.6 percent, the biggest drop since December 2008, after declining 3.0 percent in October. Gasoline has now declined for five straight months.

Food prices rose 0.2 percent after nudging up 0.1 percent the prior month. Within the core CPI, shelter costs increased 0.3 percent last month after rising 0.2 percent in October.

There were also increases in airline fares, medical care and alcohol prices. New motor vehicle prices, however, fell as did the cost of household furnishings, apparel and used cars and trucks.