US inflation on the rise

US inflation hit the highest level in two and a half years as food and energy prices moved higher, but there was little sign of a broader pick-up in inflation that would trouble the Federal Reserve.

The Labor Department said on Friday its Consumer Price Index increased 0.4 percent in April from March after rising 0.5 per cent in March.

The rise, which was in line with economists' expectations, took the year-on-year inflation reading to 3.2 percent, the highest since October 2008.

The core CPI, which strips out volatile food and energy costs, rose a mild 0.2 per cent from March, and the 12-month increase, at 1.3 per cent, was at its highest level since February 2010.

The Federal Reserve, however, would like to see that move closer to two per cent over time.

"This is not enough to prompt an immediate response from the Federal Reserve but they're certainly watching this," said Dana Saporta, an economist at Credit Suisse in New York.

The stiff gains in food and energy costs in recent months has squeezed consumers, who are enjoying only tepid wage gains.

The department said that when adjusted for inflation, average weekly earnings fell 0.3 per cent in April after declining 0.4 per cent in March.

U.S. government debt prices and stock index futures edged higher on the data.

Fed officials believe high commodity prices, which undercut economic growth in the first quarter, will not have a lasting effect on inflation, but will likely be watching the steady increase in core prices closely.

Some economists believe a sharp retreat in commodity prices in recent days signals that inflation could soon peak.