U.S. consumer prices edge up, supporting Fed rate rise

Fri Apr 17, 2015 2:05pm EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer prices increased for a second straight month in March on rising gasoline and housing costs, a sign of an uptick in inflation that should keep the Federal Reserve on course to start raising interest rates this year.

March's broad-based price gains bolster the U.S. central bank's long-held view that inflation will gradually move toward its 2 percent target as the dampening effect of lower energy prices fades.

"The data should allay the disinflation concerns that predominated earlier this year and, on the margin, increase the Fed's confidence that inflation will eventually move toward its target," said Michelle Girard, chief economist at RBS in Stamford, Connecticut.

The Labor Department said on Friday its Consumer Price Index increased 0.2 percent last month after a similar gain in February. In the 12 months through March, the CPI slipped 0.1 percent after being unchanged in February.

The so-called core CPI, which strips out food and energy costs, increased 0.2 percent in March after a similar rise in February. In the 12 months through March, the core CPI rose 1.8 percent, the largest increase since October.

While a price measure tracked by the Fed is running lower than core CPI, a number of officials have said a rate hike will likely be considered at the June policy-setting meeting.

The Fed has kept overnight interest rates near zero since December 2008. But a recent raft of weak economic data, including the March nonfarm payrolls report, has left many economists believing that monetary policy tightening will not happen before September.

"This report helps to increase policymakers' confidence, but we also need to see further improvement in the labor market. We are very comfortable with our call for a September liftoff," said Laura Rosner, an economist at BNP Paribas in New York.   Continued...

A woman pumps gas at a station in Falls Church, Virginia December 16, 2014.

REUTERS/Kevin Lamarque