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U.S. producer prices fall, signal weak inflation pressures

[December 12, 2014]  WASHINGTON (Reuters) - U.S. producer prices fell in November and were muted even outside of energy, a sign of weak inflationary pressure that could point to persistent slack in the economy.

The Labor Department said on Friday its producer price index for final demand dropped 0.2 percent, a sharper fall than expected.

A plunge in gasoline prices drove the decline.

But a core measure of producer inflation, which excludes food, energy and trade services, was flat. That could be worrisome for Federal Reserve policymakers who are expected to debate next week whether to keep a pledge that borrowing costs will stay at rock bottom for a "considerable time."

When compared to a year earlier, that core index was up just 1.5 percent, and that annual reading has been dropping a tenth of a point each month since September.

Another core reading that only strips out food and energy was also flat on the month and up 1.8 percent year over year.

Fed officials largely view the current low inflation environment as transitory and believe the likelihood of inflation running persistently below the U.S. central bank's 2 percent target has diminished somewhat since early this year. The drop in gasoline prices, for example, could prove temporary.

(Reporting by Jason Lange; Editing by Andrea Ricci)

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