Rising gas prices nudge annual inflation to 2-year high

Rising prices at the gas pump pushed annual inflation to a nearly two-year high in September, while core inflation rose modestly.

The consumer price index increased 0.3%, the most in five months, the Labor Department said Tuesday, matching economists’ estimates. The index was up 1.5% the past year, the largest annual rise since October 2014.

Excluding volatile food and energy items, so-called core inflation climbed 0.1%, below the 0.2% bump economists had forecast. The reading was up 2.2% the past 12 months following 2.3% annual increase in August.

Last month, gasoline prices rose 5.8%. Regular unleaded averaged $2.24 a gallon, up from $2.19 a month ago, according to AAA.Food prices were unchanged but Americans' average grocery bill dipped 0.1%, the fifth straight decline.

Prices increased 0.3% for rent, and 0.4% for both airline fares and car insurance. But those were offset by declines of 0.7% for clothing, 0.1% for new vehicles and 0.3% for used cars and trucks. And medical care costs were flat.

Some Federal Reserve officials have said they’d like to see a pickup in stubbornly low inflation before raising interest rates again. Fed policymakers have signaled they intend to boost the central bank’s benchmark rate by year-end for the first time in 2016, assuming economic reports in coming months back the move.

“The stabilization in core inflation supports the Fed’s cautious approach to normalizng interest rates,” economist Paul Ashworth of Capital Economics wrote in a note to clients.

Since 2014, inflation has been tempered by cheap oil and gasoline, and a strong dollar that makes imports less expensive for U.S. shoppers. This year, crude prices have crept higher while the dollar has weakened, stoking a modest pickup in inflation. The Fed tends to focus on core prices, which are less susceptible to sharp, temporary movements in food and energy costs.