U.S. consumer prices rose less than expected in March and underlying inflation slowed, suggesting the Federal Reserve will remain cautious about raising interest rates this year.
The Labor Department said on Thursday its Consumer Price Index gained 0.1 percent last month as a rebound in gasoline prices was partly offset by a drop in the cost of food. There were also slowdowns in medical care and housing costs.
The CPI fell 0.2 percent in February. In the 12 months through March, the CPI increased 0.9 percent after advancing 1.0 percent in February.
Economists polled by Reuters had forecast the CPI gaining 0.2 percent last month and rising 1.1 percent from a year ago.
The so-called core CPI, which strips out food and energy costs, inched up 0.1 percent. That was smallest increase since August and followed a 0.3 percent increase in February.
In the 12 months through March, the core CPI rose 2.2 percent after gaining 2.3 percent in February.
The Fed has a 2 percent inflation target and tracks an inflation measure which is running below the core CPI. The moderation in the monthly core CPI reading comes after Fed Chair Janet Yellen recently expressed doubts about the sustainability of broad gains in prices.
Yellen said she believed that "transitory" factors were behind the recent run-up in prices. The combination of benign inflation and weak economic growth in the first quarter suggest the Fed will not hike rates again before September, even as the labor market strengthens.
The Fed lifted its benchmark overnight interest rate in December for the first time in nearly a decade and policymakers recently forecast only two more rate hikes this year.
Despite the healthy labor market, reports on trade, wholesale inventories, retail sales and business spending suggest economic growth almost halted in the first quarter after recording a 1.4 percent annualized rate in the fourth quarter of 2015.
Growth estimates for the January-March quarter are as low as a 0.2 percent pace.
Gasoline prices rose 2.2 percent in March after plunging 13.0 percent in February. Food prices fell 0.2 percent last month, with the cost of food consumed at home posting its largest decline since April 2009.
The core CPI was restrained by housing and medical costs, as well as apparel. Owners' equivalent rent of primary residence increased 0.2 percent after increasing 0.3 percent in February. Medical care costs slowed their rapid ascent, gaining 0.1 percent after shooting up 0.5 percent in February.
Apparel prices fell 1.1 percent in March, reversing the prior month's 1.6 percent advance. Prices for new motor vehicles were unchanged while the cost of used cars and trucks dipped 0.1 percent.