US wholesale costs edged up only 0.1 per cent in April, held by way of a significant decline in food expenses.
Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3% last month after a similar gain in March.
The Labor Department said its Consumer Price Index rose 0.2 percent in April as increases in the cost of gasoline and rents were tempered by a drop in motor vehicle prices.
U.S. consumer prices rebounded less than expected in April as rising costs for petrol and rental accommodation were tempered by a moderation in healthcare prices, pointing to a steady build-up of inflation.
"The more muted ... gain in core CPI suggests that the surge in underlying inflation in the first few months of the year has faded", Michael Pearce, senior USA economist at Capital Economics, said in a note. That followed a 2.4 percent rise in the year to March.
The modest increase in consumer prices was partly due to a rebound in energy prices, which surged up by 1.4% in April after plunging by 2.8% in March. USA 10-year Treasury yields spiked lower on the news since lower inflation may mean the Fed will have to stop at two rate hikes this year.
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The energy index increased 1.4% in April after a 2.8% decline in March.
The cost of recreation fell 0.4% last month, the biggest decline since December 2009. Other gauges broadly show stronger inflation in the U.S. The Commerce Department said last week its price index for personal-consumption expenditures was up 2% from a year earlier in March. The Fed last week left its key interest rate unchanged while noting that inflation is nearing its optimal goal.
"But this does further tilt the odds in favour of two more rate hikes this year rather than the three some Fed officials have been suggesting", he said.
At this point, the Federal Reserve can be expected to raise short-term interest rates at least twice more in 2018. "And with the jobless claims data ... showing that labour market conditions are still tightening, we think underlying inflation will trend higher from here".
Apparel prices increased 0.3 percent after falling 0.6 percent.
Healthcare cost increases slowed, edging up 0.1 percent after advancing 0.4 percent in March. The cost of motor vehicle insurance fell for the first time in a year. Those numbers indicate moderate inflation, but the 12-month increase of 2.5% indicates steadily climbing inflation.