US consumer prices expected to rise in May reflecting big jump in energy costs

Economic Indicators Associated Press

The Labor Department reports on consumer prices for May at 8:30 a.m. Eastern Thursday.

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PRICES UP: The expectation is that prices rose 0.5 percent in May, reflecting a jump in energy prices, according to a survey of economists by data firm FactSet.

LOW INFLATION: Even with an increase in May, core inflation, which excludes volatile food and energy costs, is expected to have been moderate last month, rising by just 0.2 percent.

In April, core consumer prices rose 0.3 percent, the biggest one-month increase in more than a year. That increase was driven by a 0.7 percent surge in medical costs from higher hospital charges.

While inflation has accelerated modestly in recent months, it still remains very tame.

The Federal Reserve on Wednesday left a key interest rate at a record low near zero, where it has been for the past six years. Fed Chair Janet Yellen said the central bank still needs more evidence that inflation is heading back to the Fed's target of 2 percent over the next two to three years.

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For the past three years, inflation by a price gauge favored by the Fed has been running well below 2 percent. The central bank strives to achieve annual price increases of 2 percent, believing that that is the optimal rate of inflation.

Many economists believe the central bank will start moving interest rates higher later this year when it feels more confident that inflation is rising and that the job market, laid low by the recession, has regained its footing.