A key indicator of US consumer prices cooled in December as a weak labour market and weak demand contained inflationary pressures.

The core consumer price index, which excludes food and energy, rose 0.1 per cent in December from a month earlier, down from 0.2 per cent in November, according to data released by the labor department on Wednesday. Core CPI rose 1.6 per cent compared with the same period last year.

Driven by higher gasoline prices, overall CPI rose 0.4 per cent in December from November and 1.4 per cent from December 2019. Both the core and overall CPI in December were in line with the median forecast of economists surveyed by Bloomberg.

The report shows that inflation is still well below the Fed's target and reflects that the economy is still struggling to regain momentum as the pandemic intensifies. At the same time, demand in some industries is picking up, and widespread vaccination and additional fiscal stimulus are likely to boost pricing power to some extent in the coming months.

Most economists and the Fed believe that inflation will remain relatively moderate this year, but inflation expectations among market participants have been rising steadily.

Some believe that additional economic stimulus measures, coupled with the release of pent-up demand from investors in the sectors hardest affected by the epidemic, will help push up consumer prices. But many economists argue that with a slow recovery in the job market, any potential acceleration in inflation in the coming months is likely to be temporary.

As for the Fed, policymakers have hinted that they plan to keep interest rates near zero for a long time. Even if price pressures intensify, the fed's new inflation target allows inflation to moderately exceed 2% for a period of time (as measured by the commerce department's personal consumption expenditure price index).

For the whole of 2020, CPI grew by 1.4 per cent, the smallest increase since 2015, and core CPI grew by 1.6 per cent, the smallest increase since 2014.