The consumer price index increased 0.6 percent, the most since November, after a 0.2 percent gain the prior month, the Labor Department said today in Washington. So-called core prices, which exclude food and energy, increased 0.2 percent, matching the median estimate of economists surveyed by Bloomberg News.
The surge in oil and food expenses has caused inflation expectations to rise, stirring concern among Fed officials after they lowered interest rates seven times since September. Investors expect the central bank will raise rates as soon as August, futures prices show.
Consumer prices were forecast to rise 0.5 percent, according to the median forecast of 84 economists in a Bloomberg News survey. Estimates ranged from gains of 0.2 percent to 0.9 percent.
Treasuries, which had fallen earlier in the day, erased their declines after the report. Yields on benchmark 10-year notes were at 4.21 percent at 8:34 a.m. in New York, after rising as high as 4.27 percent.
Prices climbed 4.2 percent in the 12 months to May, after a 3.9 percent year-over-year gain in April. The core rate increased 2.3 percent from May 2007, the same as in the prior month.
Today's report showed energy expenses jumped 4.4 percent after being unchanged the prior month. Gasoline prices rose 5.7 percent and fuel oil costs surged 10 percent.
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.
Airlines are adding fees, increasing fares, grounding planes and cutting jobs in response to fuel prices that have doubled in the past year. Fares jumped 3.2 percent in May, the most since January 2002, the Labor Department's price report showed.
The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.
The slowing economy may be preventing most other companies from boosting prices enough to match the jump in raw-material costs. Food prices, which account for about a fifth of the CPI, rose 0.3 percent, compared with a 0.9 percent jump in April.
The economy will expand at a 0.5 percent annual rate from April to June, faster than estimated last month, according to the median forecast of economists surveyed by Bloomberg News this month. The U.S. grew at a 0.9 percent pace in the first three months of the year.