17 May 2006, 17:54  U.S. April consumer inflation up more than expected

Energy prices pushed the U.S. consumer price index up 0.6% on a seasonally adjusted basis in April, the Labor Department said Wednesday. And higher shelter costs boosted the core CPI index, which excludes food and energy prices, to a 0.3% gain. The increase in the CPI and the core rate were both slightly higher than forecast. Economists expected a 0.5% gain in the CPI, according to a MarketWatch survey. The core CPI was expected to rise 0.2%. The increase in the CPI was the highest since a 0.7% increase in January. The core CPI is up 0.3% for two straight months. In the past year, the CPI has risen 3.5%, up from 3.4% on a year-on-year basis in March. Over the same period, the core CPI has risen 2.3%, up from 2.1% in the previous month. For the first four months of the year, inflation is running at a 5.1% annual rate. This compared with a 3.4% rate for all of 2005. Excluding food and energy, the core CPI is up at a 3.0% pace so far this year, following a 2.2% rise for all of 2005. Core inflation is now at the top of the Federal Reserve's comfort zone. Policymakers have raised interest rates 16 times in a row over the past 23 months to quell inflationary pressure. The increases in the seasonally adjusted CPI should put pressure on the Federal Reserve to keep raising interest rates instead of pausing to allow the impact of the past 16 rate hikes to work through the economy. Energy prices, which increased 3.9%, were the main source of higher consumer prices in April. Fuel oil prices rose 5.2%, the largest gain since September 2005. Gasoline prices rose 8.8% in April. Over the past year, energy prices are up 17.8%, while gasoline prices are up 21.5%. Food prices were flat in April for the first time since last June. Transportation prices rose 2.4% in April. Airline fares rose 1.6%, the largest increase since last July. New car prices fell 0.1% in April. Shelter costs rose 0.3% in April, and accounted for about one-half of the increase in core prices, the government said. The core rate was also boosted by higher apparel, medical care, and education costs.

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