updated 5/18/2005 11:52:39 AM ET 2005-05-18T15:52:39

Consumer prices climbed by 0.5 percent in April, reflecting the biggest rise in energy prices in two years, along with more expensive air fares and food costs.

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But while the latest inflation snapshot showed consumer prices rising, it also suggested that inflation is not on the brink of spiraling out of control.

The increase in the consumer price index, or CPI, the government’s most closely watched inflation barometer, followed a 0.6 percent advance in March, the Labor Department reported Wednesday.

Excluding energy and food prices, which can swing widely from month to month, “core” inflation was flat in April. That’s a big improvement from March, when core inflation shot up by 0.4 percent, the largest advance in two and a half years.

“This is telling us that much feared inflationary pressures are moderating,” said Anthony Chan, senior economist at JP Morgan Asset Management. “This is very, very encouraging.”

The flat reading on core inflation, which is closely monitored by the Fed, was the best showing since November 2003.

The inflation report is likely to keep the Federal Reserve on its current path of modestly boosting short-term interest rates to keep prices in check. The Fed is expected to nudge up rates at its next meeting at the end of June and probably will continue that policy through much of this year, analysts say.

“The newest inflation reading suggest the Fed’s steady as she goes policies seem to be working,” Chan said.

In an effort to combat inflation, the Federal Reserve has raised short-term interest rates eight times — each in quarter-point increments — since last June. The most recent increases, on May 3, left the Fed’s key interest rate at 3 percent, the highest since the fall of 2001.

At their May meeting, Fed policy-makers said “pressures on inflation have picked up in recent months and pricing power is more evident,” meaning companies are finding it somewhat easier to raise prices to customers.

The overall inflation reading of 0.5 percent in April was slightly higher than the 0.4 percent rise that economists were forecasting before the release of the CPI report. But the flat reading on core inflation was better than the 0.2 percent uptick that analysts were expecting.

The CPI report showed that in April, energy and food led the way in terms of price increases.

Energy prices jumped by 4.5 percent last month. That was up from a 4 percent gain in March and represented the biggest advance since March 2003.

In April, gasoline prices went up by 6.4 percent, natural gas prices rose 5.6 percent and fuel oil increased 4.6 percent.

Rising energy costs are being driven by surging oil prices.

Oil prices skyrocketed into record territory in March and hit a new peak of $57.27 a barrel at the beginning of April. Prices have since retreated and now hover above $48 a barrel. Economists, however, are hopeful that the moderation in oil prices — if maintained — might ease inflation pressures.

At the pump, the average price nationwide of regular gasoline was $2.16 a gallon last week, according to figures tracked by the Energy Department.

Food prices, meanwhile, marched up by 0.7 percent in April, compared with a more modest advance of 0.2 percent in March. Some economists believe that rising food costs are reflecting in part higher transportation costs due to expensive fuel prices.

Airfares climbed by 3.6 percent in April, the largest increase since June 2001, as carriers boosted prices to cover higher fuel costs.

Prices for clothing, lodging and new cars all fell in April. Prices for medical care rose 0.2 percent, a moderation from the 0.5 percent rise in March. But education costs increased 0.6 percent in April, up slightly from a 0.5 percent rise in the previous month.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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