Consumer Prices Rise by Most In 4 Months

American consumer prices rose the most in four months in February, adding to concerns that quickening inflation will prompt the Federal Reserve to accelerate interest-rate increases.The consumer price index rose 0.4%, more than forecast, the Labor Department said yesterday in Washington. Prices excluding food and energy rose 0.3%, the most since September. Prices on that basis were up 2.4% from a year earlier, the biggest increase since August 2002.The report reinforced Tuesday’s statement from the Fed that pricing pressures picked up in recent months, in part because of rising energy costs. Higher prices for gasoline, airfares, and lodging contributed to February’s gain.“This report shows that inflation pass-through continues,” said the chief U.S. economist at Bear Stearns & Company in New York, John Ryding. “If the inflation data deteriorate significantly further in March, then [Tuesday’s] statement opens the door to a possible 50-basis-point rate hike” at the Fed’s May 3 meeting.The central bank Tuesday raised the benchmark rate a quarter-point for the seventh time in a row, to 2.75%, and said “pressures on inflation have picked up in recent months and pricing power is more evident.”Year-over-year prices including food and energy rose 3%, the same as in January, yesterday’s report showed.Economic reports yesterday on existing home sales and real wages reflected other themes the Fed cited in yesterday’s statement: that higher inflation hasn’t thwarted economic growth or led to increases in long-term inflation expectations.American sales of previously owned homes fell less than forecast in February to a 6.79 million annual rate, supported by cheap mortgage rates and growing employment. The 0.4% decline was from a revised 6.82 million-unit rate in January that was higher than initially estimated, the National Association of Realtors said yesterday in Washington. Economists surveyed by Bloomberg News expected a 1.5% decline.Real average weekly earnings fell 0.4% in February, the most since a drop of 0.5% in November, the Labor Department also said yesterday.Fed officials say they’ve seen little evidence that higher prices are working through to wage demands, one of the situations that might add to inflation. “Longer-term inflation expectations remain well contained,” the Federal Open Market Committee’s statement said Tuesday. The consumer price index is the government’s broadest measure of the costs of goods and services. Almost 60% of the index covers services.Energy prices, which account for about a 14th of the index, rose 2% in February after falling in the prior two months. Compared with a year earlier, energy prices were up 10.4%. Gasoline prices rose 3.2% in February and were up almost 15% from a year earlier.“It’s a bit alarming,” the chief financial economist at Bank of Tokyo-Mitsubishi in New York, Christopher Rupkey, said of the inflation report in an interview. “I’m afraid of gasoline prices going higher before the driving season begins.”Gasoline prices may have a greater effect on consumer prices this month than in February. The American retail price for regular-grade gasoline climbed to a record $2.109 a gallon for the week that ended March 21, the Energy Department said. Crude oil futures reached $57.60 a barrel on March 17, the highest in more than two decades.The cost of all goods, including cars, apparel and food, rose 0.4% last month after no change in January. Goods prices were 2.8% higher than last year. Services increased 0.3% and were up 3.1% from a year earlier.“The trend has been for core goods to pick up rather than core services, and this month’s surprise was in the core services area,” said the chief economist at Barclays Capital in New York, Dean Maki. “As far as whether core services are starting to accelerate, I think it’s too early to tell.”

Consumer Prices Rise by Most In 4 Months

Consumer Prices Rise by Most In 4 Months

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