US consumer prices in May recorded their largest increase in more than two years as petrol prices surged, suggesting an energy-driven disinflationary trend had probably run its course.

Other data on Thursday showed the labor market continued to tighten, as first-time applications for unemployment benefits declined last week to a near 15-year low. The slight pickup in inflation and a strengthening labour market put the Federal Reserve a step closer to raising interest rates later this year.

The Consumer Price Index rose 0.4 per cent last month after gaining 0.1 per cent in April, the Labor Department said. That was the largest increase since February 2013, and left the CPI unchanged in the 12 months through May after a 0.2 per cent yearly decline in April.

While energy prices are stabilising, a strong dollar is curbing underlying inflation pressures.

The so-called core CPI, which strips out food and energy costs, increased 0.1 per cent, the smallest rise since December, after advancing 0.3 per cent in April.

In the 12 months through May, the core CPI rose 1.7 per cent after a yearly increase of 1.8 per cent in April.

Given a tightening labour market, which is expected to spur stronger wage growth, the retreat in underlying inflation pressures likely does not change views that the Fed will tighten monetary policy as early as September.

The US central bank on Wednesday noted the stabilisation in energy prices and expressed confidence that inflation will gradually move toward its 2 per cent target. The Fed has kept its short-term lending rate near zero since December 2008.

In a second report, the Labor Department said initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 267,000 for the week ended June 13th. It was the 15th straight week that claims held below 300,000, a threshold usually associated with a firming labor market.

The claims data covered the period in which the government surveyed employers for the payrolls portion of June’s employment report. Jobless claims fell 8,000 between the May and June survey periods, suggesting another month of job gains above 200,000.

The dollar added to losses after the data, while prices of US Treasuries rose. US stock index futures were largely unchanged.

CURRENT ACCOUNT DEFICIT WIDENS

Last month, petrol prices jumped 10.4 per cent, the biggest increase since June 2009, accounting for most of the increase in the CPI. That followed a 1.7 per cent decline in April.

Food prices were unchanged for a second straight month. However, an outbreak of bird flu in some parts of the country that has led to a shortage of eggs could push up food prices in the months ahead.

Elsewhere, the index for rent increased 0.3 per cent. With the residential vacancy rate near a 22-year low as a firming labour market boosts household formation, shelter costs are likely to continue rising.

The medical care index increased 0.2 per cent after rising 0.7 per cent in the prior month. There were also increases in the prices of new motor vehicles, airline fares, tobacco and alcoholic beverages. But prices for apparel, used cars and trucks, and household furnishings fell.

In a third report, the Commerce Department said the current account deficit, which measures the flow of goods, services and investments into and out of the country, increased 9.9 per cent to $113.3 billion.

That was the largest shortfall since the second quarter of 2012 and likely reflected the dollar’s drag on overseas profits and exports.