Rising food costs helped push US consumer prices up for a second straight month in January by 0.4 per cent, more than offsetting a moderation in energy price rises as inflation showed signs of gaining steam, according to a Labor Department report this afternoon.
The Consumer Price Index, the most broadly used gauge of inflation, has climbed 4.3 per cent since January 2007.
More significantly, so-called core prices, which exclude food and energy items, rose 0.3 per cent in January, the strongest monthly rise since June 2006, after gaining 0.2 per cent in December.
Analysts said the rising prices at the same time that economic growth was slowing makes it more difficult for the US central bank to keep cutting interest rates.
"This is going to raise the flag on the inflation front, but it's not going to take away of the front end action from the Fed to support growth," said Lindsey Piegza, a market analyst with FTN Financial in New York.
The dollar's value rose against other major currencies as investors bet the stronger-than-forecast CPI number meant the Fed was less likely to cut interest rates aggressively. Prices for US Treasury debt securities and stock index futures also weakened.
Wall Street analysts surveyed by Reuters had forecast that overall CPI would rise by a slightly more moderate 0.3 per cent and that core prices would be up 0.2 per cent.
The department said energy prices rose 0.7 per cent in January, slowing from a 1.7 per cent gain in December and the smallest monthly rise in energy costs since August.
But food costs jumped 0.7 per cent in January after rising a scant 0.1 percent in December. Department officials said the January food cost rise was the largest since a matching gain in February last year.
The department said fruit and vegetable prices were up 2.2 per cent in January after falling 0.3 per cent in December, while costs for meat, poultry, fish and eggs climbed 0.8 per cent after declining 0.1 per cent in December.