U.S. consumer prices increased in January, with a gauge of underlying inflation posting its largest gain in 12 months, bolstering views that price pressures will accelerate this year.
Inflation is also likely to get a lift from a tightening labor market. Other data on Thursday showed the number of Americans filing for unemployment benefits fell last week to the lowest level in just over 48 years.
The inflation outlook also got a boost from a survey showing prices paid by manufacturers for raw materials jumped in February to levels last seen in May 2011. A robust labor market and rising inflation could force the Federal Reserve to raise interest rates a bit more aggressively this year than currently anticipated to prevent the economy from overheating.
The Fed has forecast three rate hikes in 2018. U.S. financial markets have priced in a rate increase this month.
The Commerce Department said consumer prices as measured by the personal consumption expenditures (PCE) price index rose 0.4 percent. That was the biggest increase since September and followed a 0.1 percent gain in December. In the 12 months through January, the PCE price index rose 1.7 percent after a similar gain in December.
Excluding the volatile food and energy components, the PCE price index advanced 0.3 percent in January – the largest gain since January 2017. The so-called core PCE price index rose 0.2 percent in December. Unfavorable base effects kept the annual increase in the core PCE price index at 1.5 percent in January.