Consumer prices in the U.S. rose a less-than-expected 0.2 per cent in January while a measure of prices than excludes food and energy fell for the first time in 28 years, the U.S. Labour Department said Friday.

On a year-over-year basis, total inflation eased by a tenth of a percentage point to 2.6 per cent.The latest figures show inflation is not filering down to U.S. consumers. (Ben Margot/Associated Press)

Shelter costs fell 0.5 per cent from December levels. Energy prices rose 2.8 per cent month-over-month, driven by higher gasoline and natural gas costs.

Excluding food and energy, core inflation actually fell 0.1 per cent from the month before — something that hasn't happened since 1982.

"This is even more surprising of an outcome when one considers that most other advanced nations have shown some recent inflation strength," said TD Securities economics strategist Ian Pollick in a commentary. "Having said that, while we don’t expect core prices to remain negative, our view for the remainder of the year is for core prices to trend lower, underscoring the large degree of slack in the U.S. economy," he wrote.

News of benign inflation gives the U.S. Federal Reserve more room to keep its key overnight lending rate at a rock-bottom zero to 0.25 per cent. Last week, Federal Reserve chair Ben Bernanke said its key rate could remain "exceptionally low" for "an extended period."

The CPI report was welcomed by markets as it came just a day after a measure of wholesale inflation showed prices rose by 1.4 per cent last month.

"After a few reports showing higher inflation trends, we saw proof today that they have yet to trickle down to the consumer level," said Jennifer Lee, senior economist at BMO Capital Markets.

With files from The Associated Press