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* Consumer prices rise 0.2 percent in March
* Price gains mostly broad-based, but food prices fall
* Core CPI rises 0.2 percent; up 1.8 percent from year ago
* Consumer sentiment rises to 95.9 in April, beats forecasts
By Lucia Mutikani
WASHINGTON, April 17 U.S. consumer prices
increased for a second straight month in March on rising
gasoline and housing costs, a sign of an uptick in inflation
that should keep the Federal Reserve on course to start raising
interest rates this year.
March's broad-based price gains bolster the U.S. central
bank's long-held view that inflation will gradually move towards
its 2 percent target as the dampening effect of lower energy
"The data should allay the disinflation concerns that
predominated earlier this year and, on the margin, increase the
Fed's confidence that inflation will eventually move toward its
target," said Michelle Girard, chief economist at RBS in
The Labor Department said on Friday its Consumer Price Index
increased 0.2 percent last month after a similar gain in
February. In the 12 months through March, the CPI slipped 0.1
percent after being unchanged in February.
The so-called core CPI, which strips out food and energy
costs, increased 0.2 percent in March after a similar rise in
February. In the 12 months through March, the core CPI rose 1.8
percent, the largest increase since October.
While a price measure tracked by the Fed is running lower
than core CPI, a number of officials have said a rate hike will
likely be considered at the June policy-setting meeting.
The Fed has kept overnight interest rates near zero since
December 2008. But a recent raft of weak economic data,
including the March nonfarm payrolls report, has left many
economists believing that monetary policy tightening will not
happen before September.
"This report helps to increase policymakers' confidence, but
we also need to see further improvement in the labor market. We
are very comfortable with our call for a September liftoff,"
said Laura Rosner, an economist at BNP Paribas in New York.
The economy, however, appears set to rebound from a soft
patch in the first quarter. In a separate report, the University
of Michigan said its consumer sentiment index jumped to 95.9
early this month from 93.0 in March.
More consumers believe now is a good time to buy big-ticket
household items, as well as automobiles. Consumers' views about
buying and selling homes improved significantly, a boost for the
The overall rise in sentiment bodes well for consumer
spending and the economy, which stumbled at the start of the
year under the weight of a harsh winter, a resurgent dollar,
weaker global growth and a now-resolved labor dispute at West
"The positive momentum in purchasing sentiment suggests
consumption should rebound in the second and third quarters of
this year and support overall growth in 2015," said Jesse
Hurwitz, an economist at Barclays in New York.
The dollar rose against a basket of currencies on the
upbeat inflation and sentiment data, while prices for U.S.
government debt were slightly weaker.
U.S. stocks fell sharply on investor concerns over a
clamp-down on margin trading in China and a number of
disappointing earnings reports from U.S. corporations.
The rise in inflation, however, may be limited by the strong
dollar, which has gained 13 percent against the currencies of
the United States' main trading partners since last June.
Economists estimate the dollar could shave half a percentage
point off inflation and economic growth this year.
Firming wage growth, however, could mitigate the dollar's
impact on inflation.
"But if the core rate is that close to target when it is
being constrained by the indirect impact of lower energy prices
and the stronger dollar, how high could it get when those
transitory effects fade next year?" said Paul Ashworth, chief
U.S. economist at Capital Economics in New York.
Last month, gasoline prices rose 3.9 percent, the largest
gain since February 2013, after increasing 2.4 percent in
February. Food prices slipped 0.2 percent last month, the
biggest drop since May 2013.
Elsewhere, shelter costs rose 0.3 percent and further gains
are likely, given rising demand for rental accommodation.
There were increases in prices of new motor vehicles, used
cars and trucks and medical care services. Prices for apparel
items and household furnishings and operations also rose.
Airline fares fell 1.7 percent.
(Reporting by Lucia Mutikani; Editing by Paul Simao and