US inflation accelerated in May to the fastest pace in more than six years, reinforcing the Federal Reserve's outlook for gradual interest-rate hikes while eroding wage gains that remain tepid despite an 18-year low in unemployment.
USA consumer prices rose marginally in May amid a slowdown in increases in the cost of gasoline and the underlying trend continued to suggest moderate inflation in the economy. With the wage growth creeping higher, it is widely expected that the USA core inflation will be rising further peaking somewhere around 2.5% in the second half of this year.
The Labor Department said on Tuesday its Consumer Price Index increased 0.2 percent also as food prices were unchanged. Throughout the past year, the nation's CPI rose 2.8% prior to seasonal adjustment, the largest yearly gain since February 2012.
The pickup in headline inflation partly reflects gains in fuel prices, though the annual gain in the core measure - seen by officials as a better gauge of underlying inflation trends - was the most since February 2017.
The Labor Department's inflation report was published ahead of the start of the Federal Reserve's two-day policy meeting on Tuesday. But core prices - which exclude the volatile food and energy categories - have risen a milder 2.2 per cent over the past 12 months. Commerce Department figures released 31 May showed the Fed's preferred gauge of core prices was up 1.8% in April from a year earlier. Fed officials have indicated they would not be too concerned with inflation overshooting the target. That, together with an expected acceleration in wage growth from a tight labor market could boost inflation later this year. Gasoline prices climbed 1.7 per cent in May and jumped 21.8 per cent from a year ago. The unemployment rate is at an 18-year low of 3.8 percent. Food prices were unchanged in May after rising 0.3 percent in the prior month.
Following a 0.3% increase in April, the US food index stayed constant in May, owing in part to a 0.7% decline in meats, poultry, fish, and eggs, as well as a 0.3% fall in fruits and vegetables.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing 0.3 percent in April.
Compared to April, however, the index rose only 0.2 percent, undershooting analyst expectations.
Healthcare costs gained 0.2 percent after nudging up 0.1 percent in April.
Prices for used cars and trucks fell 0.9 percent after tumbling 1.6 percent in April. Prices for apparel and recreation were unchanged in May.
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