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The core rate of US inflation has risen at its steepest rate in two-and-a-half years, fuelled by a sharp rise in gasoline (petrol) prices.

The 0.4% core inflation figure for March was the highest seen since August 2002 and double what economists had expected. February saw a 0.3% rise.

The jump increases the likelihood of a corresponding hike in interest rates.

The wider Consumer Price Index (CPI) figure, which also includes energy and food costs, rose by 0.6%.

This was the biggest rise in the CPI since last October, US Labor Department figures showed. It followed a 0.4% increase in February.

Fuel costs

Over the first three months of 2005 as a whole, CPI inflation rose at an annual rate of 4.3%, a full point above the 3.3% seen across the 12 months of 2004.

The latest figures are expected to raise concerns that the US Federal Reserve will start increasing interest rates at a greater pace to try to compensate for increasing inflationary pressures.

The Fed, and its chairman Alan Greenspan, have already suggested this could be a real possibility.

This was reiterated on Wednesday, when the Fed's latest "beige book" summary of economic conditions across the US, found upward price pressures in a number of 12 Federal Reserve districts.

Since last June the Fed has increased rates by seven quarter points to 2.75%, with the last rise coming on 22 March.

During March, gasoline prices climbed 7.9%, overall energy costs by 4%, food by 0.2%, and clothing by 0.8%.

Airline tickets rose by 2.7%, the biggest increase in nearly four years, as the companies pass on their increased fuel costs.

'Emboldened'

"The Fed is certainly fighting inflation right now and this probably gives them a little more oomph to fight," said economist Robert Macintosh of Eaton Vance Management in Boston.

"You can't make a decision on an individual number [the latest core inflation figure] but just based on this one number, this would make the Fed more emboldened perhaps to continue tightening."

US oil prices remained above $52 on Wednesday as a government report showed that American stocks of crude had fallen for the first time in 10 weeks.

It also showed that gasoline supplies were dropping ahead of the US's peak summer driving season.

BBC News