WASHINGTON — U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that could give the Federal Reserve ammunition to raise interest rates later this year.þþOther data on Tuesday showed housing starts and industrial production rebounded strongly last month, suggesting the economy was regaining steam early in the second quarter.þþÿThe combination of higher prices, housing gains and industrial production support the narrative of a second-quarter rebound in GDP, and will stir talks of the necessity of at least one Fed hike later this year,ÿ said Jay Morelock, an economist at FTN Financial in New York.þþThe Labor Department said its Consumer Price Index increased 0.4 percent last month, the largest gain since February 2013, after rising 0.1 percent in March. That took the year-on-year increase in the CPI to 1.1 percent from 0.9 percent in March.þþAmericans also paid more for medical care, food, recreation, tobacco, motor vehicle insurance, airline fares and grooming. Economists polled by Reuters had forecast the CPI gaining 0.3 percent last month and advancing 1.1 percent from a year ago.þþThe so-called core CPI, which strips out food and energy costs, rose 0.2 percent after climbing 0.1 percent in March. In the 12 months through April, the core CPI increased 2.1 percent after increasing 2.2 percent in March.þþThe Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.6 percent.þþThe rise in prices in April is likely to be welcomed by Fed officials who last month softened their language on inflation at the end of a regular meeting, noting that it continued to run below target because of ÿearlier declines in energy prices and falling prices of non-energy imports.ÿþþFinancial markets have almost priced out a rate hike before September, given sluggish growth at the beginning of the year. The U.S. central bank lifted its benchmark overnight interest rate in December for the first time in nearly a decade and policymakers have forecast two more increases this year.þþThe dollar rose to a session high against the euro on the data, while U.S stocks fell. U.S. Treasury debt prices rose slightly.
Source: NY Times
