The U.S. Labor Department said its Consumer Price Index rose 0.2 percent last month, less than forecasts for 0.3 percent, as a moderation in healthcare prices offset increases in the cost of gasoline and rental accommodations.
However, excluding the volatile food and energy components, "core" CPI rose just 0.1 per cent and was 2.1 per cent higher than the same month of past year. Excluding food and energy, the core gauge was up a below-forecast 0.1% from March - the least since November - and 2.1% from a year earlier, compared with projections for 2.2%.
Excluding the volatile food and energy components, the CPI edged up 0.1 percent after two successive monthly increases of 0.2 percent.
Core inflation rose 0.1 percent sequentially in the month, coming is a bit below expectations.
The dollar and US government debt yields fell on Thursday while equity markets rallied after a modest rise in consumer prices in April eased concerns the Federal Reserve might raise interest rates more than expected this year.
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Services prices outside of energy were up by two tenths of a percentage point in comparison to the month before, following an increase of three tenths in March. A separate report released May 10 by the Labor Department showed average hourly earnings adjusted for inflation rose 0.2% from April 2017. Over the past 12 months, food prices are up 1.4%.
Food prices rose 0.3 per cent last month, the largest increase in a year, after nudging up 0.1 per cent in March. Unprocessed goods costs rose 3.2% from a year earlier last month. Prices for used cars and trucks tumbled 1.6% in April, the largest drop since March 2009. Annually, core inflation increased 2.1%, slightly above the Federal Reserve's 2% target.
"Our base case is for consumer price inflation to increase at a moderate pace in the medium term, without affecting economic momentum or the Fed's monetary policy dramatically, but we do acknowledge that a slew of survey, producer price data, anecdotal reports, and higher wages point to firming inflationary pressures and that the risks to inflation are to the upside in 2018".
Shelter costs were up a more modest 0.3 per cent, but that category has a much bigger impact on the headline CPI number and has been trending up in recent months. That has led to a slowdown in job growth as employers struggle to find skilled workers. The cost of motor vehicle insurance fell for the first time in a year.