U.S. consumer prices edge up 0.1% in April

The U.S. cost of living excluding what households pay for food and fuel climbed more than forecast in April, indicating inflation is gravitating toward the Federal Reserve’s goal.

The core consumer-price index rose 0.3 percent, the biggest gain since January 2013 and reflecting broad-based increases, a Labor Department report showed Friday. In the last three months, core inflation advanced an annualized 2.6 percent, the most since August 2011. Including food and fuel, the gauge was up a more moderate 0.1 percent as prices fell at grocery stores and gas stations.

Costs may continue to firm as fuel expenses rebound, apartment rents climb and health-care services become more expensive. Such price pressures should help Fed policy makers gain confidence in their forecast that inflation will move toward a 2 percent goal as they consider their first interest-rate rise since 2006.

“It allows the Fed to say inflation is doing better,” said Michael Hanson, senior economist at Bank of America in New York. Policy makers “seem awfully confident that labor markets are going to tighten and inflation is going to pick up.”

Stocks and Treasury securities dropped after the report on concern a pickup in inflation is consistent with a Fed increase in interest rates later this year. The Standard & Poor’s 500 Index June declined 0.2 percent to 2,126.93 at 11:42 a.m. in New York. The yield on the benchmark Treasury 10-year note, which moves inversely to prices, climbed to 2.2 percent from 2.19 percent late on Thursday.

Fed Mandate

Inflation will need to keep rising in order for Fed officials to be “reasonably confident” that progress on their price stability mandate is sufficient to allow for an increase in the benchmark interest rate. The Fed’s preferred measure of price growth, the personal consumption expenditures gauge, rose 0.3 percent in the year ended March and hasn’t met the bank’s goal since April 2012.

Many of the participants in the central bankers’ April 28-29 meeting “thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied,” according to minutes of the gathering released Wednesday.