Friday, May 13, 2011

US Inflation hits 2-1/2 year high

Inflation hit the highest level in 2-1/2 years as food and energy prices moved higher, but there was little sign of a broader pick-up in inflation that would trouble the Federal Reserve.

The Labor Department said on Friday its Consumer Price Index increased 0.4 percent in April from March after rising 0.5 percent in March.

The rise, which was in line with economists' expectations, took the year-on-year inflation reading to 3.2 percent, the highest since October 2008.

The core CPI, which strips out volatile food and energy costs, rose a mild 0.2 percent from March, and the 12-month increase, at 1.3 percent, was at its highest level since February 2010.

The Federal Reserve, however, would like to see that move closer to 2 percent over time.

"This is not enough to prompt an immediate response from the Federal Reserve but they're certainly watching this," said Dana Saporta, an economist at Credit Suisse in New York.

The stiff gains in food and energy costs in recent months has squeezed consumers, who are enjoying only tepid wage gains.

The department said that when adjusted for inflation, average weekly earnings fell 0.3 percent in April after declining 0.4 percent in March. (read more)