CORE DEFLATION:

Inflation Remains Muted (JEFFREY SPARSHOTT And LUCA DI LEO, 12/15/10, WSJ)

So-called core inflation, which excludes energy and food prices and is closely watched by the Federal Reserve, inched ahead by 0.1%, the first move after three flat months.

Economists surveyed by Dow Jones Newswires ahead of the release expected consumer prices to rise by 0.2% and core CPI to gain 0.1%.

The Fed considers core inflation a better measure of price trends because it excludes the most volatile components of the index.

The annual underlying inflation rate was 0.8%, well below the Fed's informal inflation target of between 1.7% and 2%. The Fed's policy-making committee Tuesday signaled that it thinks core inflation remains too low--a key factor in last month's decision to start buying $600 billion in Treasury bonds in an effort to boost investment and consumption.