Consumer prices rose for the fifth straight

Consumer prices rose for the fifth straight month in April, and many economists said Friday they expected the Federal Reserve to raise interest rates soon to keep the economy from overheating.

The Labor Department reported that the Consumer Price Index rose 0.2 percent, which left inflation running at an annual rate of 4.4 percent so far this year. That compares with 1.9 percent for all of 2003.

While April's inflation report was tamer than many had expected - it was less than half the 0.5 percent increase recorded in March - it may not have been mild enough to discourage the Fed from raising rates next month.

That's because energy prices have been spiking in recent days, setting the stage for higher inflation this summer. "The next CPI will show a bounce-back because of energy," said John Silvia, the chief economist for Wachovia Securities.

Nationwide, retail prices for a gallon of regular unleaded gasoline stood at a record $1.953 on Friday, according to AAA's "daily fuel gauge" report. A year ago, the average was $1.50. The auto club reports that each weekday this month, a new record has been set for gas prices.

The AAA report and the CPI confirm that îîclearly, inflation has moved up,'' Silvia
said.

Excluding volatile food and energy prices, the index for what is known as "core prices" rose just 0.3 percent last month, compared with a 0.4 percent rise in March. In the past 12 months ending in April, the core index has risen 1.8 percent, but the pace has been accelerating in recent months.

In general, if the Fed policy makers who set the course of interest rates see core inflation rising at an annual rate of more than 2 percent, they raise interest rates to slow the economy.

The Fed's key interest rate is now at 1 percent, a 46-year low. Last week, Fed officials said that for the first time in four years, they are contemplating a "measured" pace of rate increases. They meet again in late June.