The consumer price index came in substantially lower than the 10-year average of 2.4 percent. It is also the first time since 1997-98 that the index remained under 2 percent for two consecutive years, the bureau said.
In the final month of the year, the CPI rose 0.3 percent in December on a seasonally adjusted basis, the agency said.
The 0.3 percent monthly jump was the highest since June 2013, when prices climbed 0.5 percent.
In the second half of the year, the consumer price index gain averaged 1.16 percent.
Food prices in December rose 0.1 percent, consistent with the prior two months. Energy prices, meanwhile, rebounded with a 2.1 percent gain after dropping 1.7 percent in October and 1 percent in November.
Core prices, which exclude food an energy costs, rose 0.1 percent in December, notching an annual rate of 1.7 percent.