- PNC Financial Services Group
The cost of living in the US recorded the biggest increase in more than three years in April, since 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. Consumer prices increased to 0.4%, which is the biggest gain since February 2013, following a 0.1% increase in March, the Labour Department report showed. That took the year-on-year increase in the CPI to 1.1% from 0.9% in March. Moreover, data showed that the so-called core CPI, which strips out food and energy costs, rose 0.2% after climbing 0.1% in March. In the 12 months through April, the core CPI increased 2.1% after increasing 2.2% in March.
The Federal Reserve has a 2% inflation target and tracks an inflation measure which is currently at 1.6%. The rise in prices in April is likely to be welcomed by the Fed officials who last month softened their language on inflation at the end of a regular meeting. However, financial markets do not expect the central bank to hike rates again before September, given sluggish growth at the beginning of the year. The US central bank lifted its benchmark overnight interest rate for the first time in nearly a decade and policymakers have forecast two more rate hikes this year.
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