WASHINGTON (AP) -- Consumer inflation registered another sizable increase in May, pushed higher by soaring gasoline prices. And most worrisome, there was further evidence that the jump in energy costs is beginning to cause more widespread inflation troubles.þþThe Labor Department reported Wednesday that its Consumer Price Index posted a 0.4 percent increase in May after an even bigger 0.6 percent rise in April. Gasoline prices jumped by 4.9 percent and have been soaring this year at an annual rate of 69.4 percent so far this year as motorists contend with pump prices above $3 per gallon in many parts of the country.þþExcluding energy and food, core inflation rose by a larger-than-expected 0.3 percent. That increase was certain to get attention at the Federal Reserve, where Chairman Ben Bernanke last week said a recent uptick in core inflation has Fed officials concerned.þþBernanke had called core inflation rising at an annual rate of 3.2 percent over the past three months as ''unwelcome.'' With the latesta data, core prices are now rising at an annual rate of 3.8 percent, the fastest pace in 11 years.þþ''These extremes likely seal the deal for a Fed rate hike on June 29,'' said Michael Gregory, senior economist at BMO Nesbitt Burns, a Toronto investment firm.þþBernanke's comments on June 5 contributed to a 199-point plunge that day in the Dow Jones industrial average. Stocks have been posting big losses in recent weeks not only in the United States but around the globe as investors worry about future prospects at a time when the world's largest economy is facing slowing growth and rising inflation pressures.þþInvestors are concerned that the Fed will raise rates for a 17th time at its next meeting on June 28-29, increasing risks that the hoped-for soft landing for the economy will instead be a more severe slowdown.þþThe 0.4 percent increase in overall inflation in May was led by a 2.4 percent jump in energy costs after gains of 3.9 percent in April and 1.3 percent in March. So far this year, energy prices have been rising at an annual rate of 30.8 percent, almost double the 17.1 percent gain for all of 2005.þþOverall, consumer prices through May have been rising at an annual rate of 5.2 percent, up from a 3.4 percent gain for all of 2005. Excluding food and energy, core consumer prices are up at an annual rate of 3.1 percent through May, an acceleration from a 2.2 percent rise in 2005.þþThe worry at the Fed is that the relentless rise in energy costs is becoming a wider inflation problem.þþThe Fed pushed a key interest rate to a five-year high of 5 percent on May 10 and since that time financial markets have been on a rollercoaster ride as opinions have shifted on whether that rate increase could be the last given growing signs that the economy is slowing.þþMany analysts believe, based on the comments Bernanke made last week and the views of other Fed officials, that the central bank will approve a 17th quarter point move at the end of this month. Some economists are concerned that the Fed may keep moving rates higher if inflation does not subside.þþIn May, food prices edged up by 0.2 percent even though most of the major food categories showed declines.þþOutside of food and energy, there was a big increase of 0.6 percent in equivalent rent prices, which was the largest gain since August 1990.þþClothing prices, which had posted big increases in the past two months, slowed to a smaller 0.2 percent rise in May but airline fares, which reflect soaring fuel costs, jumped 2.6 percent last month.þþ
Source: NY Times
