A measure of underlying U.S. inflation accelerated to the highest in a year as a drag from mobile-phone costs faded, bearing out the Federal Reserve's forecast for a pickup in price gains.
Excluding food and energy, the core consumer price index rose 2.1% from March 2017 after a 1.8% gain in the year through February, a Labor Department report showed Wednesday.
The gauge was up 0.2% from the prior month, matching the median estimate of economists. Including all items, the CPI was down 0.1% from February on a drop in gasoline costs, with the index up 2.4% from a year earlier, also the most in a year.
The core CPI’s pickup will help reinforce the view of policy makers that inflation had been weighed down by transient factors such as the unusual weakness in the cost of wireless-phone services. The acceleration will reinforce Fed expectations that its preferred gauge of inflation — a separate consumption-based figure from the Commerce Department — is gradually approaching its 2% goal.
The advance in the core CPI brought the three-month annualized gain to 2.9%, after 3.1% in February.
Mobile-phone service prices increased 0.2% in March after falling 0.5% the prior month. They had slumped a record 7% in March 2017 from the previous month as carriers sweetened data packages, and weakness in the category, along with softer prices for items such as cars and medical care, continued to restrain core CPI for the next few months.
Other details of the latest data showed the increase in pricing power reflected advances in shelter, medical care, personal care, motor vehicle insurance and airfares. Prices declined for apparel and used cars and trucks.
Investors are looking out for signs of inflation pressures that could prompt faster interest-rate hikes by the Fed. Minutes of the central bank's March meeting, when it lifted borrowing costs by a quarter percentage point, will be released later on Wednesday. Most officials have penciled in two or three more increases this year.
While the Fed's preferred gauge of inflation has missed the 2 percent goal in most months since 2012, policy makers anticipate gradual improvement and have projected 1.9% inflation for 2018. Fed Chairman Jerome Powell said last week that 12-month inflation readings “should move up notably this spring” because of the fading of weakness from a year earlier.
Meanwhile, the jobless rate is at the lowest level since 2000 as the labor market tightens, indicating the Fed has almost reached its other goal, of maximum employment.
The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. More than half of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.
Energy prices fell 2.8% from previous month, biggest drop since February 2016; food costs rose 0.1%. Apparel prices, which jumped in the first two months of the year, decreased 0.6%.
Costs for new vehicles unchanged after a 0.5% decline in February that was the most since 2009; used-vehicle prices fell 0.3% for a second month.
The price of airfares rose 0.6% for a second month.
Shelter costs, which account for about a third of CPI, rose 0.4% from the prior month, most since August; includes 0.3% increase in owners-equivalent rent, one of the categories designed to track rental prices.
