WASHINGTON (2/27/15)--Largely fueled by the price of oil, the consumer price index (CPI) dropped 0.7% in January, the largest monthly step back since November 2008 (Economy.com Feb. 26).

On an annual basis, CPI fell 0.1%, the first year-over-year decline since October 2009.

"The good news is that the majority of the weakness is concentrated in energy-related goods and services, as the core index rebounded modestly in January," said Andrew Davis, Moody's analyst (Economy.com). "This is comforting for policymakers, as concerns about disinflation bleeding into core prices were heightened after December's soft reading."

The energy index plunged by 9.7% in January, with gasoline prices--the main culprit--plummeting 18.7% from the prior month. Fuel also fell by 9.9%.

Food prices largely remained stable in January after a 0.2% rise in December. "Food at home" prices fell 0.2% with four of the six major grocery store food groups decreasing. "Food away from home" climbed 0.2% after a 0.3% increase the previous month.

Excluding food and energy, core prices climbed 0.2% in January, a slight increase in pace from December.

However, prices for new vehicles, used cars and trucks, and core commodities all fell, offsetting the gains in the core CPI.