"Core inflation is back"

[Ironside]

U.S. consumer prices shot up last month as a broad array of costs rose, according to government data on Wednesday, suggesting long-dormant inflation may be stirring and raising expectations the Federal Reserve would soon raise interest rates.

A separate report showed the U.S. trade gap narrowed in February as a weak dollar and stronger economic growth overseas propelled exports to record levels.

The Labor Department said its consumer price index, the most widely used gauge of U.S. inflation, rose 0.5 percent in March, outstripping Wall Street's forecast of a 0.3 percent gain and marking an acceleration from February's 0.3 percent rise.

In addition, the closely watched core CPI, which strips out often-volatile food and energy costs, surged 0.4 percent for the biggest increase since November 2001. Economists had expected core CPI to advance just 0.2 percent.

"It looks as though core inflation is back," Moody's Investors Service Chief Economist John Lonski said.

The report bolstered a growing conviction in financial markets that a long period of historically low interest rates could draw to a close sooner than thought just weeks ago. Treasury bond yields spiked to their highest levels this year and the dollar rose. Stock prices managed small gains.