Consumer prices in the U.S. rose slightly in January, but the increase was smaller than expected due to falling gas prices. 

Overall prices increased by just 0.1%, with the largest increases in housing, food and medical care service costs and capped a relatively tame year for inflation.

Core prices, prices excluding food and energy, rose 0.2% in January and 2.3% over the last 12 months. The increase in core CPI is due primarily to increasing housing costs. In January,  the housing price index rose 0.4%, double the increase in December.  

Medical costs had their smallest increase since last February. However, over the last 12 months, medical care services costs had the overall highest percentage increase, excluding the volatile food and energy indexes, at 5.1%, more than double the unadjusted inflation rate. 

Other factors such as apparel, recreation, and airline fares also contributed slightly to the rising core CPI. Food prices rose by 0.2%, the same increases as prices in December. 

However, rising prices in headline CPI was offset with falling energy prices last month. Gas prices fell by 1.6% with overall energy costs down by 0.7%.

According to Christopher Low, chief economist at FNH Financial, falling energy prices is a trend we will see continue in the coming months as the impact from COVID-19, the official name of the coronavirus, is felt across the globe.

“Oil prices have collapsed in February because Chinese demand is down about 20% with the virus,” he said. 

Over the next few months, falling gas prices will continue to depress headline CPI, keeping the inflation rate low.   

The price indexes for used cars and trucks, prescription medicine, motor vehicle insurance, and household furnishings and operations were among other indexes to decline this month. 

The Federal Reserve is unlikely to change interest rates this year as they contend with a slightly lower rate of inflation than the targeted rate of 2%. 

“They’re trying to get inflation higher and it’s been hard for the Fed to do that,” said Ryan Sweet, head of monetary policy at Moody. “There are some structural things that are preventing inflation from accelerating more, technological change, the Amazon effect, and an aging population.”

Inflation remains low despite a strong economy with modest increases in consumer prices. Unemployment is at a 50 year low, the job market is strong and the economy is in its eleventh year of expansion.