The U.S. Consumer Price Index rose 0.1% in November, which is tick softer than consensus, indicating that inflation remains virtually non-existent south of the border.

The core rate, excluding food and energy, is up 0.2%, which is in line with expectations. CIBC World Markets says that, “The first drop in gasoline prices since May helped hold the headline rate down. But over the last 12 months, the acceleration from the 1.1% low in CPI set in both June and January/February to 2.2% today was accounted for by a flip from negative to sharply positive year-on-year inflation in energy prices.”

“Strip out food and energy, and U.S. consumer goods prices show no inflation at all,” says CIBC. “In the very near term, headline CPI has upside risks due to the ongoing spike in energy prices. But if energy prices are, as seems highly likely, lower a year from now than they are today, CPI could easily be below 1%. The Fed isn’t targeting such a low inflation rate, seeing it as too close to outright deflation. The tame core CPI readings open up room for a further Fed rate cut, and the absence of material job creation will make such a move necessary to sustain consumer spending.”

“In our view, progress seen toward lower inflation during the last six months may prove to be all we get. Inflation is probably starting to bottom near 2% in the United States. Inflation leading indicators have tightened, and the Fed shows little appetite to experiment with movement into lower-inflation territory,” offers BMO Nesbitt Burns.