Today

US consumer prices increased more than expected in May on the back of rising fuel and food costs.

Data from the Labor Department showed that consumer prices surged 0.7 per cent on a month-on-month basis.

Core inflation, which excludes food and energy costs, jumped 0.1 per cent in May, the Labor Department said.

The 0.7 per cent jump in consumer prices is the largest gain since Hurricane Katrina forced Gulf Coast oil production to shut down in the autumn of 2005.

But analysts played down fears that the figures could force the US Federal Reserve to increase interest rates at its next meeting in June.

The Federal Reserve has kept rates steady at 5.25 per cent for twelve consecutive months.

Robert Macintosh, of Eaton Vance Management, told the BBC News website: "This number does not change anything for the Fed.

"We have been seeing good core numbers and this continues that.

"Given all the angst we have had in the bond market the last two weeks I don't see how one number like this is going to make the sentiment change."

According to the Labor Department, energy prices rose 5.4 per cent in May, including a whopping 10.5 per cent jump in gasoline pump prices.

Food prices increased 0.3 per cent last month, the Labor Department added.

Consumer prices climbed 0.4 per cent in April, following a gain of 0.6 per cent in March.

These latest figures brought the annual rate of consumer price inflation to 2.7 per cent for the 12 months to May 31.

Core prices have shot up 2.2 per cent in the same period.