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US inflation fastest in more than 6 years in May

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US inflation fastest in more than 6 years in May

U.S. consumer prices rose at their fastest annual rate since February 2012 in May, reinforcing expectations of a Federal Reserve rate hike on June 13.

Headline inflation came in at 2.8% annually, in line with expectations, up from 2.5% annual inflation in April. The annual all-items index has been on the rise since the beginning of the year, according to the U.S. Bureau of Labor Statistics.

Core prices, which exclude food and energy, registered annual growth of 2.2%, compared to 2.1% posted in April.

The release came ahead of an expected 25-basis-point Fed hike at its upcoming meeting.

Month over month, consumer prices rose 0.2% in May on a seasonally adjusted basis, the same rate as in April. Core inflation accelerated to 0.2% from 0.1%.

Gasoline and shelter were the largest contributors to the seasonally adjusted monthly hike in May, as they were in April. The gasoline index increased 1.7%, more than offsetting declines in some of the other energy component indexes and led to a 0.9% rise in the energy index. The medical care index rose 0.2%. The food index remained unchanged over the month.

The inflation data came after core personal consumption expenditure, the Fed's preferred measure of inflation, held steady at 1.8% in April, unchanged from the downwardly revised reading in March.

While trade concerns remain a major issue, the Fed is likely to sound positive on economic momentum on June 13, said ING, which has penciled in two more hikes in the second half of the year.

However, TD Securities expects three hikes in total for 2018, unless stronger evidence emerges of overheating in the labor market or due to fiscal stimulus.

Ten-year Treasury yields rose 2 basis points around 9:35 a.m. ET.