WASHINGTON – U.S. consumer prices surged last month, the government said on Tuesday in a report likely to cement market expectations that the Federal Reserve will begin raising interest rates at the end of the month.
The consumer price index (search), the most widely used gauge of U.S. inflation, rose 0.6 percent in May, the Labor Department (search) said. That was the largest one-month gain since January 2001 and well above market expectations for a 0.4 percent advance.
But the so-called core CPI (search), which strips out volatile food and energy costs, climbed a more modest 0.2 percent — matching Wall Street forecasts.
Over the last 12 months, core inflation has risen 1.7 percent, and economists expect the central bank will begin raising short-term borrowing costs from their current 1958 low of 1 percent to rein in rising price pressures. Fed policy-makers meet on June 29-30 to decide monetary policy.
Energy prices fueled much of May's price increases, rising 4.6 percent from April, as gasoline prices jumped 8.1 percent. Household fuel costs also rose, with fuel oil up 3.5 percent, natural gas up 1.2 percent and electricity 1.1 percent higher.
Shelter costs, which had advanced sharply in March and April, moderated to a 0.2 percent increase in May.
In a separate report, the department said real average weekly earnings fell 0.4 percent in May after edging 0.1 percent higher in April. Earnings were down 0.5 percent from a year earlier.