- The Washington Times - Wednesday, June 14, 2006

1:22 p.m.

Consumer inflation registered another sizable increase in May, pushed higher by soaring gasoline prices. Most worrisome, there was further evidence that the jump in energy costs is beginning to cause more widespread inflation troubles.

The Labor Department reported today that its Consumer Price Index posted a 0.4 percent increase in May after an even bigger 0.6 percent rise in April. Gasoline prices jumped by 4.9 percent and have been soaring this year at an annual rate of 69.4 percent as motorists contend with pump prices above $3 per gallon in many parts of the country.

Excluding energy and food, core inflation rose by a larger-than-expected 0.3 percent. That increase was certain to get attention at the Federal Reserve, where Chairman Ben Bernanke last week said a recent uptick in core inflation has Fed officials concerned.

President Bush, who has seen voter unhappiness over soaring gas prices help send his approval ratings to record lows, told reporters at the White House that he had confidence the Fed would do its job to keep inflation from becoming a problem.

“Monetary policy will pay attention very carefully to the signs, inflationary signs — that’s Ben Bernanke’s job,” Mr. Bush said, referring to his former White House economic adviser. Mr. Bush selected Mr. Bernanke to replace Alan Greenspan as Fed chairman.

Mr. Bernanke last week called core inflation rising at an annual rate of 3.2 percent over the past three months “unwelcome.” With the latest data, core prices are rising at an annual rate of 3.8 percent, the fastest pace in 11 years.

“These extremes likely seal the deal for a Fed rate hike on June 29,” said Michael Gregory, senior economist at BMO Nesbitt Burns, a Toronto investment firm.

Mr. Bernanke’s comments on June 5 contributed to a 199-point plunge that day in the Dow Jones Industrial Average. Stocks have been posting big losses in recent weeks not only in the United States but around the globe as investors worry about future prospects at a time when the world’s largest economy is facing slowing growth and rising inflation pressures.

The 0.4 percent increase in overall inflation in May was led by a 2.4 percent jump in energy costs after gains of 3.9 percent in April and 1.3 percent in March. So far this year, energy prices have been rising at an annual rate of 30.8 percent, almost double the 17.1 percent gain for all of 2005.

Outside of food and energy, there was a big increase of 0.6 percent in equivalent rent prices, which was the largest gain since August 1990.

Overall, consumer prices through May have been rising at an annual rate of 5.2 percent, up from a 3.4 percent gain for all of 2005. Excluding food and energy, core consumer prices are up at an annual rate of 3.1 percent through May, an acceleration from a 2.2 percent rise in 2005.

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