NEW YORK, United States (Reuters):

US consumer confidence ebbed in December, while a key measure of inflation held steady in November for the first time in four years, boosting the chances of Federal Reserve interest rate cuts in 2007.

The University of Michigan said the final December reading of its consumer sentiment index slipped to 91.7 from 92.1 in November.

However, the index was slightly above economists' median forecast of a 90.2 reading, causing govern-ment bond prices to deepen losses. The dollar rose across the board, reaching close to a two-month high against the yen.

Personal spending

Analysts said the survey, coupled with earlier reports on core personal spending prices and durable goods, was likely to give comfort to officials at the Fed, who have said inflation is at uncomfortably high levels.

"The inflation readings show contained inflation expectations, as the Fed has been hoping for, even if there's no indication of significant new progress," Pierre Ellis, senior economist at Decision Economics in New York.

The University of Michigan's price expectations over a one-year period, an important guidepost for interest rate policy, dipped to 2.9 per cent, its lowest since February 2005, from 3.0 per cent in November.

The Commerce Department reported its core November personal spending price index, which excludes volatile food and energy costs, was unchanged from October - the first time since October 2002.

The last time there was a drop in core prices was September 2001, when core prices dipped 0.5 per cent. Core prices rose 0.2 per cent in October and analysts had expected a 0.2 per cent increase.