US consumer prices rose modestly in March

 

US consumer prices rose modestly in March, after remaining flat in the prior month, following a rise in energy costs in recent weeks, a government report showed on Wednesday.

 

Economists warned that wholesale prices for energy and food have spiked and that this could spur more pronounced consumer price hikes in coming weeks.

 

The Labor Department said in a monthly update that its Consumer Price Index (CPI) rose 0.3 per cent in March. The increase matched most economists' expectations.

 

Stripping out volatile food and energy costs, the core CPI gained 0.2 per cent last month, as most analysts had predicted. Both gauges posted their strongest gains since January.

 

Consumer prices have risen sharply in the 12 months to March, jumping 4 per cent, the report showed. The core CPI has risen 2.4 per cent in the year to March.

 

Inflation pressures are being largely stoked by rocketing crude oil prices and increased food costs as commodity prices soar around the world.

 

Oil prices struck fresh record highs on Wednesday as a key oil futures contract, traded in New York, briefly hit an all-time high of $114.50 (Dh421) a barrel.

 

The Labor Department inflation snapshot showed that rising energy costs accounted for much of the rise in consumer prices last month.

 

Energy costs rose 1.9 per cent in March, partly as natural gas and heating oil prices surged.

 

Food costs increased a more modest 0.2 per cent last month, as a drop in pork, diary and fruit prices helped keep overall food costs tethered.

 

Economists said the latest consumer price readings would give the Federal Reserve more room to continue its interest rate-cutting campaign to help fire up flagging US economic growth.

 

"For the Federal Reserve this inflation news brings some relief. Concerns of rising inflation remain high, but recent core gains remain moderate. If inflation expectations are kept under control by such evidence, then the Fed has a freer hand to cut rates," said Stephen Gallagher, an economist at Société Générale.

 

Fed chairman Ben Bernanke, who has presided over a series of aggressive rate cuts since September, has said that slowing US growth will likely tame inflationary pressures.

 

If inflation remains muted, it would make it easier for the Fed to cut rates further amid mounting concerns that the US economy will endure a recession during the first half of this year. (AFP)