WASHINGTON - U.S. consumer prices rose in January at the fastest pace in nearly four years, strengthening the case for the Federal Reserve to raise interest rates this year.
The Labor Department says consumer prices rose 0.6 percent last month, the most since February 2013. A 7.8 percent jump in gasoline prices accounted for almost half the increase. Stripping out volatile food and energy prices, consumer inflation rose 0.3 percent.
Overall, consumer prices rose 2.5 percent from a year earlier, most since March 2012.
After remaining low following the 2007-2009 Great Recession, inflation is finally running above the Fed’s 2 percent annual target. The central bank left a key interest rate unchanged at its Jan. 31-Feb. 1 meeting. It said it needs more time to monitor the economy but still expects to raise rates gradually.
In a separate report out Wednesday morning, the Commerce Department said Americans increased their spending at gasoline stations and restaurants in January, pushing up overall retail sales even as auto buying fell.
Commerce said retail sales rose a seasonally adjusted 0.4 percent last month, slowing down from a solid 1 percent gain in December.
Higher gas prices drove a 2.3 percent sales increase at service stations. Purchases at restaurants and bars climbed 1.4 percent. But sales at auto dealers slipped 1.2 percent after jumping 2.9 percent in December.
Over the past 12 months, retail sales have risen a solid 5.6 percent. The greater spending likely reflects the improving job market. Employers added 227,000 workers in January, while the unemployment rate ticked up slightly to 4.8 percent because more people started looking for jobs and were counted as unemployed.