Picture: ISTOCK
Picture: ISTOCK

Washington — US consumer inflation dipped in March amid plunging petrol prices, but the annual rate rose, suggesting a long-awaited up-tick in price pressures could be drawing near, the US labour department reported on Wednesday.

The sharp drop in fuel prices masked rising costs for shelter, food and medical care that could support Federal Reserve plans to raise interest rates this year and next.

Meanwhile, wage data showed rising hourly earnings for workers, which could also fuel inflation.

The consumer price index (CPI), which tracks costs for household goods and services, slipped 0.1% compared with February, driven lower by a 4.9% decline in petrol prices, according to the report. Natural gas prices also fell 1.2%. The result undershot analyst expectations, which had called for a 0.1% increase.

Excluding volatile food and fuel prices, "core" CPI gained 0.2%, matching the consensus forecast.

The fuel price jump was likely to be dismissed as noise, since economists had predicted the volatility in the spring months after seeing similar moves last year. But more significant was the 12-month measure for CPI which jumped two tenths to 2.4%, the second consecutive increase and the highest rate since March of last year.

The core 12-month measure moved even faster, gaining three tenths of a point to 2.1% after holding steady for three months, putting it at its highest level since February 2017.

Meanwhile, average hourly earnings posted the biggest gain since July 2016, rising 0.4% in March, following the 0.1% decline in February. Fed policy makers closely watch wages and prices to decide monetary policy, although they focus on a different inflation indicator, the personal consumption expenditures price index.

But the CPI remains an important benchmark and the March price data could send jitters through Wall Street, where investors get skittish when faced with signs the Fed could raise interest rates more aggressively.