Core U.S. consumer prices rose in April by most in two years

(Bloomberg) — The cost of living excluding food and fuel rose at a faster pace than expected in April, indicating inflation is inching toward the Federal Reserve’s goal.

The core consumer-price index climbed 0.3 percent, the biggest gain since January 2013, reflecting broad-based increases, a Labor Department report showed today in Washington. The median forecast of 84 economists surveyed by Bloomberg called for a 0.2 percent advance. Prices including food and fuel rose 0.1 percent.

Costs will probably continue to increase as fuel expenses stabilize and a lack of apartments pushes up rents, one of the biggest categories. Further firming in price pressures should help Federal Reserve policy makers gain confidence inflation will move toward their 2 percent goal as they consider their first interest-rate rise since 2006.

“Potentially, things are building in terms of inflation faster than we thought,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut. “If core inflation really is firming, then all of a sudden that starts putting pressure on the Fed.”

Stock-index futures and Treasury securities dropped after the report on concern a pickup in inflation would cause Fed policy makers to raise interest rates later this year. The contract on the Standard & Poor’s 500 Index maturing in June declined 0.2 percent to 2,124.6 at 9:01 a.m. in New York. The yield on the benchmark Treasury 10-year note, which moves inversely to prices, climbed to 2.22 percent from 2.19 percent late on Thursday.

Survey results

Estimates for core consumer prices in the Bloomberg survey ranged from little changed to a 0.3 percent advance. At a year- over-year rate, they rose 1.8 percent in April, the same as in the prior month.

Consumer prices including all categories were projected to rise 0.1 percent, with estimates ranging from a 0.4 percent drop to a 0.4 percent advance. The CPI declined 0.2 percent in the 12 months ended in April, the biggest year-to-year drop since October 2009. That mainly reflected the plunge in energy costs that has recently abated.

Energy costs decreased 1.3 percent in April after rising 1.1 percent a month earlier. Food costs were little changed.

Real wages

Restrained food and energy costs are helping prop up Americans’ spending power. Hourly wages adjusted for inflation increased 2.3 percent over the past 12 months on average, compared with a 2.1 percent gain in the year ended March, according to a separate report from the Labor Departmentissued Friday.