A big jump in energy costs pushed US consumer prices up 0.4 per cent in February and the pace of underlying inflation also quickened, the government said today in a report that stoked inflation worries.
The Labor Department said the core consumer price index, which strips out volatile food and energy costs, rose 0.3 per cent.
It was the biggest rise since September and broke a string of four straight gains of 0.2 per cent.
Wall Street economists had expected the widely used consumer price index to rise a milder 0.3 per cent overall and 0.2 per cent excluding food and energy.
The consumer price report added to growing inflation jitters and increased speculation the Federal Reserve, which raised credit costs yesterday, might step up the pace of its rate increases to keep inflation at bay.
Prices for US government bonds moved into negative territory after the report, with the yield on the benchmark 10-year note hitting its highest level since June 2004.
The US dollar, already trading at one-month highs against the euro, moved higher still, while futures markets bet on stocks prices opening down.
The Fed yesterday took note of growing inflation pressures as it bumped overnight borrowing costs up a quarter-percentage point to 2.75 percent, leaving itself room to depart from its "measured" course of small rate hikes if needed.
"Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident," it said. Over the past 12 months, consumer prices have risen 3 per cent, in part reflecting a 10.4 per cent surge in energy costs.