Oil and Food Push Consumer Prices Higher in May
Inflation hit hard in May as prices for a wide swath of consumer goods rose at their fastest pace since November, underscoring warnings from central bankers and adding to a growing consensus that the Federal Reserve could raise interest rates by the end of the year.
The Consumer Price Index, which measures prices of a batch of common household products, rose 0.6 percent last month, with much of the increase coming from high fuel costs. The nationwide average for gasoline topped $4 a gallon last weekend as the price of oil reached record levels.
Gasoline prices rose 5.2 percent in May and were up 21 percent compared with a year ago, according to the report, released by the Labor Department on Friday. On an annual basis, inflation ran at 4.2 percent compared to May 2007. The rise in the index was slightly more than economists had forecast.
Food prices rose again in May as Americans paid 5 percent more for foods and beverages than a year ago.
The high cost of oil pushed up prices for several other products. Many businesses, squeezed by higher shipping and production costs, sought to pass those costs onto their customers in May.
Minus the cost of food and gasoline, inflation was 0.2 percent for the month.
Prices for tobacco, commodities, housing costs, and utility fuels all increased for the month.
In April, the C.P.I. rose 0.2 percent, after a 0.3 percent rise in March. Food prices alone rose 0.9 percent in April.
There has been a growing sense on Wall Street this week that the Fed has shifted its focus from supporting growth to fighting inflation. Top central bankers around the world, including Fed chairman Ben S. Bernanke, have said that they will seek to resist the rise in global food and energy prices, a signal that higher interest rates, which can curb inflation, may be in the offing.
Treasury bonds, particularly the two-year note, shot up after the Fed speeches this week, an indication that investors expect rates to rise. The two-year note was on track for its sharpest weekly loss since 1982. The dollar also gained against the euro.
