Sharp increases in prices for gasoline, fuel oil, shelter and medical care helped send a key measure of US inflation to a six-year high in May, according to new data released Tuesday.
The fuel-driven jump in prices comes a day before the Federal Reserve is overwhelmingly expected to raise the benchmark lending rate for the second time this year to keep a lid on inflation.
Rising prices also showed signs of eating into hourly worker wages, which were flat in May when adjusted for inflation, compared to the same month last year.
The Consumer Price Index, which tracks costs in household goods and services, rose 2.8 percent year-over-year in May, the highest since February 2012, the Labor Department reported.
Compared to April, however, CPI rose only 0.2 percent, undershooting analyst expectations.
Outside volatile energy and food prices, costs for other goods and services, such as prescription drugs and hotel stays, posted steady gains as well, lending support for the Fed's gradual plans to remove stimulus from the economy.
On an annual basis, gasoline prices rose 21.8 percent, the biggest jump in more than a year, while fuel oil rose 25.3 percent. Natural gas, however, fell 0.8 percent compared to 12 months earlier.
But economists say the central bank is unlikely to overreact to those price hikes, even it if pushes overall inflation beyond the Fed's two percent goal.
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"The Fed has signaled that it will conduct monetary policy with the aim of being symmetrical around its two percent inflation target," Mickey Levy of Berenberg Capital Markets said in a research note.
"That means that initially it will likely look through the energy-induced inflation boost and focus on core inflation instead."
Outside the volatile energy sector, price pressures were more modest, even declining in some areas.
Compared to April, inflation excluding food and fuel -- so-called core CPI -- rose only 0.2 percent, matching expectations.
But on a 12-month basis, core CPI rose 2.2 percent, the largest increase since February of last year, driven higher by rising costs for shelter and medical care.
This was offset by year-on-year declines in new and used cars, air fares and mobile telephone services, which fell 0.5 percent.
But housing costs were on the rise, as the May report showed a strong 3.5 percent gain for the shelter index, due to gains in hotel rates, rents and owner equivalent rents, which tracks goods and services tied to home-ownership.
Primary rent and owner equivalent rents account for more than 40 percent of core CPI, according to Ian Shepherdson of Pantheon Macroeconomics.
Economists expect 2018 will finally see rising inflation after years of weakness which baffled had policymakers amid falling unemployment and steady job creation.
Shepherdson said despite signs core inflation may be "contained," the central bank was looking at the horizon.
"The Fed's rate hikes for some time yet will be aimed at reducing the perceived threat of future inflation, rather than dealing with an immediate problem," he said in a research note.
The central bank has raised the key lending rate six times since December 2015 to remove stimulus from the economy and try to avoid fueling higher prices.
On an annual basis, US gasoline prices rose 21.8 percent in May, the biggest jump in more than a year