After the first decline in more than a year, U.S. consumer prices rebounded in April, reflecting higher cost of gasoline, food and housing costs.
The Labor Department said the Consumer Price Index jumped 0.2% last month, matching economists’ expectations for a rebound after the 0.3% drop in March.
“The rise in prices suggested that March’s drop, which was the first in 13 months, was an aberration,” Reuters said.
Compared to the prior year, CPI rose by 2.2%, against a 2.3% forecast. The year-on-year gain in March was 2.4% but over the past 10 years the average year-on-year gain is 1.7%.
So-called core CPI, which excludes food and energy costs, increased by 0.1% month-on-month, and by 1.9% year-on-year, a 19-month low. It was forecast to increase by 0.2% month-on-month and 2% year-on-year.
In March, the core index fell 0.1%, the first decline in more than six years, due to an unusually large drop in the cost of wireless telephone services. That component fell again in April, along with medical care, motor vehicles and apparel.
The Fed’s preferred measure of inflation — the personal consumption expenditures (PCE) price index — is currently at 1.6%, below its target of 2.0%.
But according to Reuters, April’s increase in consumer prices “added to a tightening labor market and rising producer inflation in suggesting that the U.S. central bank could raise borrowing costs at its June 13-14 policy meeting.”
“More and more of the pieces are falling into place, outside of some ‘temporary’ setbacks, for the Fed to pursue its path, not only to further raising its target rates but also to begin unraveling QE [quantitative easing],” Business Insider said, noting that producer prices rose 2.5% in April from a year ago, the sharpest increase in more than five years.
New York Fed president William Dudley, citing the strong labor market and steadily rising inflation, said last week that “we are going to want to gradually remove monetary policy accommodation.”