US consumer inflation continues rise at end of 2016

US consumer prices continued to rise in December, with one measure of price gains registering its biggest increase in two and a half years, the Labor Department said Wednesday.

The pick-up in inflation comes as US monetary policymakers say they foresee a faster pace of interest rate increases this year than initially anticipated, to keep prices from accelerating too much.

Largely driven by increases in the costs of shelter and gasoline, the Consumer Price Index rose 0.3 percent for December on a seasonally adjusted basis, matching analyst expectations and marking a faster pace than the 0.2 percent gain in November, but slower than October's 0.4 percent increase.

Excluding the more volatile food and energy categories, prices rose 0.2 percent for the month.

Over the 12 months ended in December, CPI gained 2.1 percent, its highest level since June 2014, and just above the Federal Reserve's 2.0 percent target. That measure has been steadily increasing since July, when it stood at 0.8 percent.

Excluding food and energy, the 12-month change in core CPI was more stable, rising to 2.2 percent from the 2.1 percent in November.

"In short, core inflation remains tame, although it is up a little over the last two years," Jim O'Sullivan, chief economist at High Frequency Economics, said in a note to clients.

"Meanwhile, headline inflation has just about caught up with core inflation as the drag from plunging oil prices has faded."

The Federal Reserve last month adopted its first interest rate increase in a year and now anticipates doing so three times in 2017. Low inflation was among the chief reasons that most policymakers had resisted increasing rates last year.

"Low inflation has allowed the FOMC to be comfortable in its extremely accommodative policy stance, but it will be on the lookout for any price pressures showing signs of overheating in the economy," Mickey Levy of Berenberg Capital Markets said in a research note.

"The risks are for more Fed rate hikes than currently expected."