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A gas nozzle is used to pump petrol at a station in New York February 22, 2011.

SHANNON STAPLETON/REUTERS

U.S. consumer prices fell in November for the first time in six months, pointing to muted inflation pressures that should allow the Federal Reserve to stay on its ultra-easy monetary policy path as it nurses the economy back to health.

The Labor Department said on Friday its Consumer Price Index dropped 0.3 per cent last month as a sharp decline in gasoline prices offset increases in other areas. It was also the largest drop since May and followed a 0.1 per cent gain in October.

Economists polled by Reuters had expected consumer prices to fall 0.2 per cent.

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The so-called core CPI, which excludes food and energy prices, edged up 0.1 per cent after rising 0.2 per cent in October. Although food prices rose 0.2 per cent in a lagged response to the summer drought, price pressures remain tame.

"The inflation data continues to be benign and there is very little in the way of price pressures in the economy," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

"That therefore justifies the Federal Reserve's action to keep a very accommodative monetary policy."

The Fed said on Wednesday it expected to hold interest rates near zero until unemployment falls to at least 6.5 per cent and as long as inflation does not threaten to break above 2.5 per cent and inflation expectations are contained.

The U.S. central bank also replaced an expiring stimulus program with a fresh round of Treasury debt purchases, to help speed up economic growth in the near term. Labor market slack is a major factor in dampening inflation pressures.

U.S. bond prices extended modest gains after the data, while stock index futures turned negative.

In the 12 months to November overall consumer prices increased 1.8 per cent, the smallest increase since August. That compared to October's 2.2 per cent rise.

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Last month, gasoline prices tumbled 7.4 per cent, the largest drop since December 2008, after falling 0.6 per cent In October. That offset a 0.2 per cent gain in food prices.

Gasoline prices at the pump fell 29 cents in November, easing some of the strain on household budgets. The Labor Department said inflation-adjusted average weekly earnings rose 0.5 per cent last month, reversing October's 0.5 per cent fall.

Away from gasoline and food, the cost of apparel fell 0.6 per cent after increasing 0.7 per cent in October. New motor vehicle prices rose 0.2 per cent after slipping 0.1 per cent the prior month.

Auto prices could have been lifted by a spike in demand as people replace vehicles destroyed by superstorm Sandy in late October. Prices for used cars and trucks fell 0.5 per cent, declining for a fifth straight month.

Housing costs edged up, with owners' equivalent rent rising 0.2 per cent after climbing by a similar margin in October. Rents have been advancing in recent months, largely driven by a decline in homeownership.

Steady job market gains are also helping to boost demand for accommodation as some people who had moved in with family and friends during the recession seek places of their own.

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In the 12 months to November, core CPI increased 1.9 per cent after rising 2.0 per cent in October.

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