Consumer inflation reappeared in December, after a two-month hiatus, but the increase of 0.3% was hardly an inflation warning of note. In fact, the Consumer Price Index increase followed an unchanged reading in November and a decline of 0.1% in October. Expectations for the latest quarter, meanwhile, had been 0.3%. So, there would logically be no reaction.

As to the inflation report, the gain, excluding the volatile food and energy components, was just 0.1%. This core inflation result has shown gains of either 0.1% or 0.2% for a number of months in a row, suggesting that there also is no underlying inflation of any consequence, even after we back out food and energy.

As to those twin volatile components, food costs were up just 0.1% in December. Such expenses have ranged from no change to a gain of 0.2% every month since June. Energy costs, though, are another matter. Here, they jumped by 2.1% last month, following consecutive declines of 1.7% and 1.0% in October and November. There is nothing new here.

As to other components, prices for new vehicles were flat in December, while they fell by 0.2% for used cars and trucks. Apparel costs rose sharply, however, surging by 0.9%. Still, such costs had declined for three months in succession.

As to year-over-year inflation, aggregate prices were up just 1.5% last year, while core inflation increased by a very tame 1.7%. Clearly, there is no inflation problem, at present, which explains why the Federal Reserve has continued to be so aggressive in keeping interest rates at record lows.

All told, this was a reassuring report, in part because it reaffirmed that there is insufficient inflation to make pricing a concern while there is enough inflation, however modest, to prevent widespread fears of disinflation or deflation.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.