E C O N O M I C R E P O R T O F T H E P R E S I D E N T

started to rise in March and continued to do so over the course of the year,reversing a 2-year slide. Oil prices were a main factor in the down-and-up patternof energy prices. The price of West Texas Intermediate (WTI), a standardbenchmark for oil prices, stood at year’s end at about $26 per barrel, a bitabove its level at the end of 1996, but well above that of a year ago, whenWTI cost about $11 per barrel.Core inflation, in contrast, has remained subdued. On a consistently measuredbasis, the core CPI-U-RS increased only 1.9 percent over the 12 monthsof 1999, slightly below the previous year’s 2.2 percent increase. By comparison,core CPI-U-RS inflation has averaged 2.3 percent over the last 7 years.Core PCE prices, which also exclude the food and energy components,increased by only 1.5 percent over 1999 as a whole, after rising 1.4 percent in1998. Since the fourth quarter of 1992, core PCE prices have risen only 1.9percent per year on average. The CPI and the PCE price index differ in thegoods and services they cover and in their method of computation, but byeither measure core inflation has remained remarkably stable and lowthroughout this expansion.A number of factors have helped keep core inflation in check despiteanother year of strong output growth and tight labor markets. First, prices fornonpetroleum imported goods were little changed over the year, after decliningmore than 3 percent over 1998. The market basket on which the CPI isbased includes imported goods, so that changes in the prices of these goods62 | Economic Report of the President