WASHINGTON – U.S. consumer prices rose a moderate amount in May, driven up by rising energy costs and the biggest increase in shelter costs in more than nine years.
Consumer prices increased 0.2 per cent last month following a 0.4 per cent April increase, the Commerce Department reported Thursday. Energy prices rose for a third straight month, but food costs fell.
Core inflation, which excludes volatile food and energy, was also up 0.2 per cent in May.
The Federal Reserve indicated Wednesday that it is still concerned about low inflation. The central bank left its key policy rate unchanged in a range of 0.25 per cent to 0.5 per cent. After moving the rate up by a quarter-point in December, the first rate hike in nearly a decade, the central bank has delayed any further increases because of concerns about tepid economic growth and inflation that is stuck at ultra-low levels.
Over the past 12 months, overall inflation has risen a modest 1 per cent, reflecting in part the fact that energy prices are down 10.1 per cent over that time period. Core inflation is up 2.2 per cent over the past 12 months.
The Fed back in December had indicated it expected to raise rates four times this year. But it lowered that expectation to just two rate hikes in March. And this week, the Fed revealed that the number of Fed officials who believe there will be only one rate hike this year has risen from one to six.
Energy prices rose 1.2 per cent in May, with gasoline prices up 2.3 per cent. Even with the increase, gas pump prices are still 16.9 per cent below where they were a year ago.
Food prices dropped 0.2 per cent in May are up just 0.7 per cent over the past year.
The rise in core inflation in May reflected a 0.4 per cent increase in shelter costs, the biggest one-month gain since February 2007. Rents have been rising in recent months.
Hotel and motel costs were up 0.7 per cent. The cost of medical care increased 0.3 per cent in May, while clothing costs were up 0.8 per cent.