US consumer prices rose a smaller-than-expected 0.2 per cent in April as energy prices paused in their recent surge, a Labor Department report this afternoon showed.
So-called core prices, which exclude volatile food and energy, were up just 0.1 per cent, half the increase analysts had forecast.
Food costs have jumped by 0.9 in the year.
Stock futures rose, Treasury debt prices pared losses and the dollar fell on the report, which suggested the Federal Reserve might have more room to cut interest rates without sparking inflation to help buttress a weak economy.
During the month, energy prices were unchanged after a 1.9 per cent rise in March, as gasoline prices dropped 2 per cent. However, energy prices are up 15.9 per cent from the same time a year ago.
Meanwhile, in a sign higher energy prices are in the pipeline for US consumers, crude oil prices hit a record high this week, likely pushing gasoline prices even higher from already record levels.
Still, year-over-year consumer prices rose more modestly than forecast. Overall prices advanced 3.9 per cent from April a year ago and core prices were up 2.3 per cent. Analysts were expecting a 4 per cent advance in overall prices and a 2.4 per cent gain in core prices.
A separate report showed US mortgage applications rose for a second consecutive week last week, fueled by a jump in demand for home refinancing loans as interest rates dropped.
The Mortgage Bankers Association said its index of mortgage applications, which includes both purchase and refinance loans, for the week ended May 9th climbed 2.9 per cent.