Washington, DC, Apr. 14--Higher energy prices boosted overall U.S. consumer prices, but even excluding volatile food and energy costs consumer prices rose sharply. The news may further fan fears that the Federal Reserve will raise interest rates later this year.
The Consumer Price Index rose 0.5% in March, up from a 0.3% increase in February, the Labor Department said Wednesday.
The closely watched core index, which excludes food and energy items, rose 0.4%, its biggest increase since November 2001. The core index rose 0.2% in February. In annual terms, the core rate rose to 1.6% for the 12 months that ended March, up from 1.2% for the 12 months ended in February.
The rise in the core index in March was due to gains in apparel prices and in the cost of lodging away from home, such as hotels, the Labor Department said. Apparel prices surged 0.9% in March, the biggest gain in nearly five years. The cost of lodging away from home rose 3.8%.
Economists surveyed by Dow Jones Newswires and CNBC had called for a 0.3% gain in the overall index and a 0.2% increase in the core index.
The numbers are likely to heighten market speculation that the Fed will raise interest rates later this year. Most economists now expect the Fed will boost rates as early as August.
In its report Wednesday, the Labor Department said energy prices rose 1.9% last month after a 1.7% increase in February. Gasoline prices rose 5.5% in March after a 2.5% gain in February. Food prices rose 0.2% in March after rising by the same amount in February.
Housing prices, which account for 40% of the index, rose 0.3%, after rising 0.2% in February. Within housing prices, prices for shelter, which includes the cost for hotels and rent, rose 0.6% in March, its biggest increase since January 1991.
Transportation prices climbed 1.1% after a 0.7% gain in February. Prices of new motor vehicles fell 0.1%. Medical-care prices rose 0.6%. Prices of physicians' services rose 0.9%.
