By Lucia Mutikani
WASHINGTON (Reuters) - U.S. import prices increased more than expected in April amid rising costs for petroleum products and a range of other goods, which could help boost domestic inflation and keep the Federal Reserve on course for further interest rate hikes.
The Labor Department said on Wednesday that import prices jumped 0.5 percent last month after gaining 0.1 percent in March. It was the fifth straight monthly increase and beat economists' expectations for a 0.2 percent advance.
"Higher import prices today helps build the case for another rate hike at the June Fed meeting as the deflation threat has long passed for this economic cycle," said Chris Rupkey, chief economist at MUFG Union Bank in New York.
In the 12 months through April, import prices rose 4.1 percent after increasing 4.3 percent in March. Prices shot up 4.7 percent on a year-on-year basis in February, the biggest gain in five years. They are rising as the drags from a strong dollar and weak global import prices fade.
U.S. financial markets were little moved by the data amid investor caution after President Donald Trump on Tuesday abruptly fired FBI Director James Comey.
In April, prices for imported petroleum rebounded 1.6 percent after declining 0.4 percent in March. Import prices excluding petroleum gained 0.4 percent, the biggest increase since July 2016, after edging up 0.1 percent in the prior month.
Import prices excluding petroleum have now risen for four straight months, in part reflecting the dollar's 3 percent decline against the currencies of the United States' main trading partners this year.
Import prices excluding petroleum rose 1.4 percent in the 12 months through April, the largest increase since March 2012. The steady rise in underlying import prices could over time put upward pressure on consumer inflation.
"With job gains rebounding to decent levels, only some sudden deceleration in inflation might slow the Fed from its appointed round of rate hikes," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.
"Well, it doesn't look like inflation is going to decelerate anytime soon."
The U.S. central bank raised its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year.
Prices for imported capital goods rose for a third straight month in April, while the cost of imported motor vehicles surged 0.5 percent, the biggest gain in five years. Imported food prices increased 0.3 percent.
The cost of goods imported from China dipped 0.1 percent last month, leading to a 1.2 percent decline on a year-on-year basis. Prices have not risen on a yearly basis since October 2014.
The report also showed export prices increased 0.2 percent in April after rising 0.1 percent in March. Prices rose 3.0 percent year-on-year after increasing 3.4 percent in March.
Prices for agricultural exports advanced 0.3 percent last month as a record 37.9 percent jump in vegetable prices offset falling prices for soybeans, corn and wheat. In the 12 months through April, agricultural export prices rose 4.6 percent.