The Consumer Price Index rose 0.4 per cent in August after jumping 0.5 per cent in July. The core index, which excludes volatile food and energy prices, rose 0.2 per cent.
For the 12 months that ended in August, the core index surged 2 per cent, the biggest year-over-year increase in nearly three years. That's at the high end of the Federal Reserve's informal inflation target. It could limit the central bank's ability to take further steps to try to revive the economy.
The Labor Department said food prices rose 0.5 per cent, the biggest increase since March. That was due to higher prices for cereals and dairy products. Energy prices increased 1.2 per cent.
Among the factors driving up the core index were rental costs. They rose 0.4 per cent, the most in nearly three years. Many Americans have been renting rather than buying homes, pushing up rents.
Clothing costs rose 1.1 per cent, extending a string of increases that stem partly from steep rises in cotton prices earlier this year. Airline fares rose 1.1 per cent, the most since March.
Sharp price increases for gas and food have pushed up most measures of inflation this year. That has reduced consumers' purchasing power, cut into their ability to spend on other items and weakened the economy. But the prices of many commodities have retreated since the summer. And many economists forecast that inflation will peak in the next few months.
Since August, gas prices have ticked up. The average nationwide price of gas was $3.63 a gallon Wednesday, according to AAA. That was about 4 cents higher than a month ago.
Some inflation can be healthy for the economy. That's because it encourages people to spend and invest rather than sitting on their cash. More spending drives corporate growth, which makes businesses more likely to hire.
There are signs that core consumer prices could level off soon. Cotton prices have come down by nearly half from the spring, and clothing costs are expected to follow.
And new-car prices rose earlier this year because of supply shortages caused by Japan's March 11 earthquake. The impact of that disruption is beginning to fade. New-car prices were unchanged in August for the second straight month.
Food prices are still rising. The Agriculture Department said Monday that unusually hot summer weather has damaged the corn harvest, which could raise prices for corn and ultimately most food products. That's because corn is used in everything from cereals to animal feed to sodas. It takes about six months for changes in corn prices to filter down to grocery store shelves.
Fed Chairman Ben Bernanke acknowledged last week that rising commodity prices had pushed up inflation this year but said it was likely to moderate in coming months.Suggest a correction