Consumer Prices Jump by Most in 3 Mos.
Wednesday May 17, 9:07 am ET
Consumer Prices Jump by Most in 3 Mos.; Core Inflation Rises 0.3 Percent in April
WASHINGTON (AP) -- Consumer prices jumped by 0.6 percent in April, the most in three months, pushed higher by rising costs for a wide range of goods and services including gasoline, clothing, rent and medical care.
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The big increase in the government's most closely watched inflation barometer, the Consumer Price Index, came after a stong 0.4 percent advance in March, the Labor Department reported Wednesday.
Excluding energy and food products, which can swing widely from month to month, "core" prices went up by 0.3 percent in April for the second month in a row. The Federal Reserve and economists closely look at this core inflation reading to get a better sense of how other prices are acting.
The sizable increase in core prices could fan fears that rising energy costs may be starting to breed a broader bout of inflation throughout the economy.
The latest readings on inflation were slightly worse than economists were expecting. Before the release of the report, they were forecasting a 0.5 percent increase in overall consumer prices and a 0.2 percent rise in core prices.
So far this year, consumer prices are rising at an annual rate of 5.1 percent, much faster than the 3.4 percent increase registered for all of 2005. Core prices are advancing at a brisk 3 percent pace, compared with a more moderate 2.2 percent rise for last year.
To fend off inflation, the Federal Reserve bumped up interest rates last week to a five-year high of 5 percent. It was the 16th increase since the Fed began to tighten credit in June 2004.
Fed policymakers left options for future decisions wide open. They suggested another increase might be possible, or they could take a pause in their rate-raising campaign depending on how inflation and economic activity unfold.
The Fed's next meeting is June 28-29. Economists have expressed mixed opinions on whether the Fed will boost rates again at that time, although Wednesday's report might bolster the case for such action.
One of the things the Fed will be keeping close tabs on is how energy prices affect inflation and economic activity.
Oil prices hit a record high of $75.17 a barrel in late April; they are now hovering close to $70 a barrel. Those high crude oil prices have pushed up prices at the gasoline pumps to $3 a gallon in some areas.
Wednesday's report said that energy prices shot up by 3.9 percent in April. That was up from 1.3 percent in March and was the biggest gain since January. Gasoline prices rose 8.8 percent last month. Fuel oil prices went up 5.2 percent. Electricity prices rose 0.3 percent.
Clothing prices, which increased 0.6 percent, also helped to push up inflation at the consumer level last month. So did airline prices, which went up 1.6 percent, the largest since July. Medical care costs rose 0.4 percent. Costs for shelter, including rent, incrased 0.3 percent.
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