US consumer prices rose more than forecast in May as Americans paid more for fuel, underscoring the Federal Reserve's concern that inflation will pick up.
The consumer price index increased 0.6 per cent, the most since November, after a 0.2 per cent gain the prior month, the Labor Department said today in Washington.
So-called core prices, which exclude food and energy, increased 0.2 per cent, as forecast by the median estimate of economists.
The surge in oil and food expenses has caused traders to bet the central bank will increase interest rates as soon as September following seven reductions in the past nine months.
Fed Chairman Ben S. Bernanke this week pledged to "strongly resist" any rise in consumers' price expectations that would cause inflation to spiral out of control.
"The Fed doesn't have any good choices at this time," said Kevin Logan, senior market economist at Dresdner Kleinwort in New York.
"The Fed will stay on hold, though the possibility of them responding to inflation has increased." Prices climbed 4.2 per cent in the 12 months to May, after a 3.9 per cent year-over-year gain in April.
The core rate increased 2.3 per cent from May 2007, the same as in the prior month. Today's report showed energy expenses jumped 4.4 per cent after being unchanged the prior month. Gasoline prices rose 5.7 percent and fuel oil costs surged 10 per cent.
Energy costs are keeping up the pressure on prices. Crude oil reached a record $139.12 a barrel on the New York Mercantile Exchange last week, and AAA figures show regular gasoline surged to a record in excess of $4 a gallon at the pump this week.