The Labor Department said its Consumer Price Index excluding the volatile food and energy components rose 0.3 percent last month also as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased.
That was the biggest advance in the so-called core CPI since January and followed a 0.1 percent gain in November. Core CPI increased 1.8 percent in the 12 months through December, picking up from 1.7 percent in November. Economists polled by Reuters had forecast core CPI rising 0.2 percent month-on-month and holding steady at 1.7 percent on an annual basis.
Weak import and producer price reports this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI data.
Economists are hoping that a tightening labor market, rising commodity prices and a weak dollar will lift inflation toward the Federal Reserve's 2 percent target this year.
The U.S. central bank's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has undershot its target since May 2012.
The U.S. central bank is forecasting three rate hikes this year. It increased borrowing costs three times in 2017.
Supporting the rise in underlying inflation pressures last month, rents increased 0.4 percent. Owners' equivalent rent of primary residence climbed 0.3 percent after gaining 0.2 percent in November. The cost of medical care increased 0.3 percent, with prices for prescription medication surging 1.0 percent after rising 0.6 percent in November. The cost of both hospital and doctor visits increased 0.3 percent.
Households also paid more for new motor vehicles, which rose 0.6 percent in price last month, the biggest gain since January. The cost of motor vehicle insurance increased 0.6 percent. Apparel prices, however, fell 0.5 percent.
Cheaper gasoline prices limited the increase in the overall CPI to 0.1 percent in December after climbing 0.4 percent in November. That lowered the year-on-year increase in the CPI to 2.1 percent from 2.2 percent in November.
Last month, gasoline prices fell 2.7 percent after rebounding 7.3 percent in November. Food prices rose 0.2 percent after being unchanged for two straight months.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci) (([email protected]; 1 202 898 8315; Reuters Messaging: [email protected]))