Consumer prices dip 0.3% — largest amount in more than two years

Consumer prices fell in March by the largest amount in more than two years, pushed lower by another sharp decline in the price of gasoline and other energy products.

Consumer prices dropped 0.3% in March following a tiny 0.1% rise in February, the Labor Department reported Friday. It was the first monthly decline in 13 months and the biggest drop since prices fell 0.6% in January 2015. In addition to a big 6.2% fall in gasoline prices, the cost of cellphone plans, new and used cars and clothing were all lower last month.

Core inflation, which excludes volatile food and energy, dropped 0.1% last month. Over the past 12 months, inflation is up a moderate 2.4% while core prices have risen 2%.

The Federal Reserve seeks to manage the economy to produce annual increases in inflation around 2%. But since the 2007-09 recession, the worst downturn in seven decades, inflation for a number of years lagged below the 2% level, raising concerns that the economy could be in danger of toppling into a destabilizing period of falling prices, something not seen in America since the 1930s.

However, with steady gains in employment and a jobless rate now down to 4.5%, the lowest in nearly a decade, and energy prices rebounding, inflation is beginning to rise. The Fed last month boosted a key interest rate for the second time in three months and has projected two more rate hikes this year. Three rate hikes this year compare to single rate hikes in each of the past two years. The Fed uses higher interest rates to keep inflation under control.

For March, energy prices dropped 3.2%, led by the big 6.2% plunge in gasoline prices. Even with the decline, gasoline prices are 19.9% higher than a year ago.

Food costs edged up 0.3% last month but remain only 0.5% higher than a year ago.

Outside of energy and food, the prices of car insurance, medical care and airline fares were all up in March.