The labour department said the consumer price index rose 0.6% in April, while the core index, which strips out volatile food and energy prices, rose 0.3% for a second consecutive month. Wall Street economists had expected consumer prices to rise 0.5% last month, with core prices up just 0.2%.
Prices for US government bonds and stock futures fell, while the dollar temporarily pared earlier losses as traders saw the report as boosting odds of further interest-rate hikes from the US central bank.
Clearly this is going to tilt the Federal Reserve a little bit more in favor of a hawkish position, said Les Satlow, a portfolio manager at Cabot Money Management in Salem, Massachusetts. The labour department said half of the increase in the core inflation index was due to a 0.3% gain in shelter costs, with increases in the cost of apparel, medical care, and education and communication also contributing. The rise in shelter costs reflected the second straight monthly 0.4 percent increase in the departments rents-based measure of owner-occupied housing costs. Economists say the rental market appears to be tightening as Americans give up trying to buy.