Prices

The steady rise in U.S. inflation resumed in April, though the increase in core consumer prices was tempered by a slowdown in the growth of healthcare costs.

The Labor Department said the consumer price index gained 0.2% last month after slipping 0.1% in March. Gasoline prices rebounded with a 3.% gain after a 4.9% drop in March.

In the 12 months through April, the CPI increased 2.5%, the biggest gain since February 2017, after rising 2.4 % in March.

Excluding the volatile food and energy components, the CPI edged up 0.1% after two straight monthly increases of 0.2% and rose 2.1% year on year, matching March’s increase. Economists had forecast the CPI rebounding 0.3% in April and the core CPI climbing 0.2%.

The muted increase in core CPI “suggests that the surge in underlying inflation in the first few months of the year has faded,” Michael Pearce of Capital Economics told MarketWatch. “Even so, we still expect core inflation to rise further from here, as tighter labor market conditions push wage costs gradually higher.”

The Federal Reserve has set a 2% target for its preferred inflation measure, the personal consumption expenditures index excluding food and energy. In March, core PCE accelerated to 1.9% year-on-year and economists expect it to breach the Fed’s target this month.

“If [inflation] goes much higher, the Fed is likely to raise U.S. interest rates, or the cost of borrowing, more aggressively,” MarketWatch said. “The central bank doesn’t want inflation to get too hot to handle.”

Markets currently agree with Fed projections for three rate hikes this year but some economists believe there could be a fourth.

The gas price increase in March reflects the surge in global oil prices that began after OPEC and other major oil producers agreed in 2016 to cut crude production. “Further increases are likely after crude oil prices jumped to 3-1/2-year highs on Wednesday in the wake of President Donald Trump’s decision on Tuesday to pull the United States out of an international nuclear deal with Iran,” Reuters reported.

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