Another surge in energy prices helped push US underlying inflation up at the sharpest rate in 2.5 years during March, the Labor Department said today in a report that rocked financial markets.
The Consumer Price Index, widely used as a major gauge of inflation, was up 0.6 per cent last month - the sharpest monthly gain since October - following a 0.4 per cent rise in February.
But surprisingly and on a more worrisome note, the so-called core rate that strips out volatile food and energy costs accelerated to a 0.4 per cent increase in March from 0.3 per cent in February.
That was the biggest monthly increase in core inflation since a matching 0.4 per cent jump in August 2002, and reflected a broad-based pickup in the prices many things, including food, gasoline, clothing, medical care and airline fares.
Prices for US Treasury securities plummeted after the report as investors feared it might induce the US Federal Reserve to boost interest rates more rapidly.
The dollar's value rose immediately after the report because higher interests would make the US currency more attractive to foreigners.
Wall Street economists had expected the widely used CPI price index to rise a more moderate 0.5 per cent and the core to gain 0.2 per cent.
Analysts said it was likely to reinforce concerns at the Fed, cited in its recent minutes from its last policy-setting meeting, that there was growing reason to monitor signs of inflation.