U.S. consumer prices soft, underlying inflation pushes up

WASHINGTON

Holiday shoppers look at store windows at Henri Bendel store on 5th Avenue in New York November 23, 2012

Reuters/Brendan McDermid

U.S. consumer prices moderated in April on weak gasoline prices, but rising shelter and medical care costs boosted underlying inflation pressures, which should keep the Federal Reserve on course to raise interest rates later this year.The Labor Department said on Friday its Consumer Price Index rose 0.1 percent last month after increasing 0.2 percent in March. In the 12 months through April, the CPI fell 0.2 percent, the largest decline since October 2009, after dipping 0.1 percent in March.
Economists polled by Reuters had forecast the CPI edging up 0.1 percent from March and dipping 0.1 percent from a year ago.
The so-called core CPI, which strips out food and energy costs, increased 0.3 percent, the largest gain since January 2013, after advancing 0.2 percent in March.
In the 12 months through April, the core CPI rose 1.8 percent after a similar gain in March.
The upward thrust in core inflation should keep the U.S. central bank on track to tighten monetary policy this year, despite what appears to be
sluggish economic growth in the first half of the year.
A recent batch of weak data, including April industrial production and retail sales, has left many economists even doubting that the Fed will raise rates in September. The central bank, which has a 2 percent inflation target, has kept overnight interest rates near zero since December 2008.
Gasoline prices fell 1.7 percent in April after increasing 3.9 percent in March. Food prices were unchanged after slipping 0.2 percent in March.
Elsewhere, shelter costs increased 0.3 percent after a similar gain in March. Shelter inflation could continue to rise in the months ahead as rising household formation pushes down rental vacancies.
The medical care index rose 0.7 percent, the largest rise since January 2007. There were also increases in the cost of household furnishings, which posted their largest gain since September 2008.