Plummeting gas prices pushed inflation into negative territory in January, the Bureau of Labor Statistics reported Thursday.
Measured by the Consumer Price Index, the U.S. experienced slight deflation of 0.1 percent year-over-year.
The decline was the first annual price drop in the U.S. since the depths of the fallout of the financial crisis in 2009.
Gas prices, however, accounted for the overall downward movement in prices in January. If not for a nearly 20 percent drop in the index for gas prices, overall prices would have risen 0.1 percent in the month, as opposed to falling 0.7 percent on a seasonally-adjusted basis.
Core inflation, a less-volatile measure of overall price changes that strips out the costs of food and energy, was up 0.2 percent on the month in January and 1.6 percent year-over-year.
Unplanned-for deflation is usually associated with economic downturns. It can hurt companies by increasing the value of their long-term debt relative to their short-term revenues.
But officials at the Federal Reserve have maintained that the recent slowdown in inflation is a byproduct of the collapse in oil prices, and not a sign of deeper weakness in the economy. Since last summer, oil prices have fallen roughly in half, a development that economists attribute to both increasing production and slowing demand overseas.
Fed chairwoman Janet Yellen said in congressional testimony Thursday that the effects of oil prices on inflation would be “transitory.”
“And, especially with an improving labor market…we expect inflation over the medium term, the next two or three years, to move up” to the Fed’s 2 percent target, Yellen said.
The measure of inflation that the Fed watches most closely, the core Personal Consumption Expenditures index, stood at 1.3 percent annually in December, the most recent month for which data is available.
Yellen and other top policymakers have said that low oil prices will benefit Americans, most of whom will save money at the pump.
