2018.04.3022:18:00UTC+00U.S. Inflation Near Fed’s 2% Target

US prices moved closer to the Federal Reserve's target, leaving policymakers on track for further hikes in short-term interest rates, after the central bank's preferred measure of inflation accelerated to its fastest pace in over a year in March.

The rise in the annual inflation gauges reported by the Commerce Department was anticipated by economists and Fed officials and is not expected to alter the U.S. central bank's gradual pace of interest rate hikes.

Annual inflation readings in March of last year were weighed down by large declines in the price of cell phone service plans, and decelerated through much of 2017.

Consumer prices as measured by the personal consumption expenditures (PCE) price index jumped 2.0 percent on a year-on-year basis last month. That was the biggest gain since February 2017 and followed a 1.7 percent rise in February. The PCE price index was unchanged on a monthly basis largely because of cheaper gasoline after rising 0.2 percent in February.

The so-called core PCE price index rose 0.2 percent on a month-on-month basis in March after a similar gain in February. The core PCE index is the Fed's preferred inflation measure.

The numbers come a day before the Fed begins a two-day meeting this week at which it is expected to leave rates unchanged but point the way to a further quarter-point increase in rates in June. With unemployment forecast to fall below 4 percent this year, the Fed is attempting to prevent the US economy from overheating by proceeding along a gradual upward path, with rates forecast to peak above 3 percent in 2020. The central bank's key rate is currently 1.5-1.75 percent.

The dollar advanced to near a three-month high against the euro on Monday on the back of weaker-than-expected German data. Prices for longer-dated U.S. Treasuries rose marginally while U.S. stocks were mixed.