U.S. Consumer Prices Rose Modestly in April -- Update

Moderating price increases show inflationary pressures are stabilizing this spring after a monthslong acceleration.

The consumer-price index, which measures what Americans pay for everything from radishes to rent, advanced a seasonally adjusted 0.2% in April from the prior month, the Labor Department said Friday. Excluding the often volatile categories of food and energy, so-called core prices rose just 0.1% from March.

The annual increase in consumer prices slowed for the second straight month, with prices rising 2.2% in April from a year earlier. February's 2.8% annual increase was the largest in five years.

Prices excluding food and energy were up 1.9% on the year. It was the first time the annual gain in core prices had been below 2% since October 2015.

A lower trajectory for consumer inflation will be closely monitored by Federal Reserve policy makers, but with the unemployment rate at the lowest level in a decade, central bankers still appear to have leeway to increase the benchmark interest rate at their June meeting.

Weakness in core inflation "will give Fed officials some pause for thought," said Andrew Hunter, economist at Capital Economics. But "we still anticipate another interest-rate hike."

The Fed targets a 2% annual increase in inflation, as measured by the Commerce Department's personal-consumption-expenditures price index. That index is just below the mark, advancing 1.8% from a year earlier in March.

The Fed appears poised to raise rates next month and then likely again in September, before beginning to wind down a $4.5 trillion securities portfolio late in the year.

"I believe the conditions are in place for a sustained return over the next year or so to our symmetric goal of 2% inflation," Loretta Mester, president of the Federal Reserve Bank of Cleveland, said earlier this month. Those conditions include the strength of the labor market and expectations for stronger economic growth.

Consumer prices rose at a steady clip from August through January, but the pace of increases has eased in recent months.

Overall prices had declined 0.3% on the month in March, and advanced 0.1% in February. The March decline was partly due to an unusual decrease in the cost for mobile-phone services and a fall in seasonally adjusted gasoline prices.

In April, gasoline prices increased 1.2% from March, and were up 14.3% from a year earlier. Food prices rose 0.2% last month, and were up 0.5% from a year earlier.

Shelter costs -- which account for about a third of the overall price index -- increased 0.3% on the month and rose 3.5% on the year in April.

Prices for cars, apparel and prescription drugs all fell last month.

A separate Labor Department report showed average weekly earnings for private-sector workers, adjusted for inflation, rose 0.4% in April from the prior month. From a year earlier, inflation-adjusted weekly earnings were up 0.3%. Inflation-adjusted wage gains have improved in recent months after declining at the start of the year. Still, so-called real earnings are growing at a much slower pace than recorded in most of 2015 and 2016.

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

May 12, 2017 11:29 ET (15:29 GMT)