WASHINGTON (AP) — Consumers paid more for gas and food in April, lifting inflation to its highest level in two and a half years. But inflationary pressures have begun to ease this month and analysts say some prices could taper off by summer.
The Consumer Price Index increased 0.4 percent in April, the Labor Department said. In the past 12 months, prices have risen 3.2 percent. That's the biggest year-over-year gain since October 2008.
Excluding volatile food and energy, prices ticked up 0.2 percent and have risen only 1.3 percent this year. That's double the gain posted six months ago, but still below the level the Federal Reserve considers a healthy pace of inflation.
The cost of new and used cars, clothing, and medical care all increased, pushing up the core index. Car prices likely increased because of temporary parts shortages caused by the March 11 earthquake and tsunami in Japan. Most other prices were subdued.
Oil prices have fallen from their peak of $114 a barrel earlier this month to about $100 Friday. The prices of corn and other grains have also declined in recent days
Economists say gas and food prices should retreat later this year. High prices are likely slowing the economy in the April-June quarter. But growth should pick up in the second half of this year, they say.
"With commodity prices now dropping back, it looks like inflation is close to peaking," said Paul Ashworth, chief U.S. economist for Capital Economics. He says year-over-year inflation should climb to 3.5 percent before dropping in the second half of the year.
Cary Leahey, an economist at Decision Economics, said yearly inflation figures should start to decline in the next several months, although core prices should continue to rise. The Federal Reserve won't need to start raising interest rates until next year to keep inflation in check, he said.
Gas prices rose 3.3 percent in April. That accounts for half last month's increase. They have soared more than 33 percent in the past year. Demand in fast-growing developing countries and political turmoil in the Middle East have caused oil prices to rise. Prices at the pump have since leveled off near $4. That's up $1.09 from last year.
Food prices increased 0.4 percent last month. That's half the previous month's increase, which was the largest in nearly three years. The price of fresh vegetables fell. Dairy, meat, fish and eggs all rose.
Federal Reserve Chairman Ben Bernanke has said that the impact of higher food and gas prices should be temporary. The central bank has also said it is watching closely for any signs of inflation. Seven months ago, when the core index had risen only 0.6 percent in a year, the Fed was more concerned about falling prices. The October reading was the smallest increase since the index began in 1957.