(MENAFN- Arab Times) Rising shelter and medical care costs boosted underlying US inflation pressures in April, a welcome sign for the Federal Reserve as it contemplates raising interest rates this year.

The Labor Department said on Friday its Consumer Price Index, excluding food and energy, increased 0.3 percent last month. It was the largest rise in the so-called core CPI since January 2013 and followed a 0.2 percent gain in March.

Economists who had expected core inflation to increase 0.2 percent last month said the increase, which also reflected gains in the prices of household furnishings and new and used motor vehicles, should keep the US central bank on track to hike rates before the end of 2015.

"It will give the Fed greater confidence that inflation will indeed make it to its target in the next couple of years, it increases the odds of faster Fed action," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

The dollar rose to a 3-1/2-week high against the euro, while prices for US government bonds fell. US stocks traded slightly lower.

While slower economic growth in the first half of the year has diminished the chances of a mid-year rate hike, a declining unemployment rate and rising demand for housing suggest core inflation could continue to push higher this year even if medical costs subside.

Minutes of the Fed's April meeting released on Wednesday said "many" policymakers did not believe that the data by June "would provide sufficient confirmation that the conditions" for raising the key short-term interest rate had been meet.

A recent batch of weak data, including April industrial production and retail sales, has left many economists even doubting the Fed will raise rates in September.

Fed Chair Janet Yellen could give fresh clues on the rate outlook when she gives a speech on the economy later on Friday.

The central bank, which has a 2 percent inflation target, has kept overnight interest rates near zero since December 2008.

It tracks a price measure that is running below core CPI.

In the 12 months through April, core CPI advanced 1.8 percent after a similar gain in March.

"September is still the most likely (rate) lift-off date, but July is not out of the question, particularly not if we get another couple of robust rises in core consumer prices in May and June," said Paul Ashworth, chief economist at Capital Economics in Toronto.

The fading dollar rally also was seen keeping core inflation on an upward trend. The dollar surged about 15 percent against the currencies of the United States' main trading partners between June last year and mid-March. It has handed back some of those gains and is now up only 10 percent.

"If sustained that should help weakness in core goods prices continue to moderate," said Ted Wieseman, an economist at Morgan Stanley in New York.

The overall CPI edged up 0.1 percent last month after increasing 0.2 percent in March. It was held back by a 1.7 percent drop in gasoline prices and no change in food prices.

In the 12 months through April, the CPI fell 0.2 percent, the largest decline since October 2009, after dipping 0.1 percent in March.

Core inflation was lifted by a 0.3 percent increase in shelter costs, which followed a similar gain in March. Shelter inflation is being driven by rising household formation, which is boosting demand for rental accommodation.

The medical care index rose 0.7 percent, the largest rise since January 2007. Household furnishings posted their largest gain since September 2008.

Prices for new and used cars and trucks rose for a third straight month. Airline fares, however, fell, as did apparel prices, which recorded their first drop since December. Jennifer Lee, senior economist at BMO Capital Markets, said that both overall inflation and core prices have accelerated modestly over the past six months.

"This suggests that although inflation remains very tame, economic growth, sporadic as it is, " is helping prices stabilize instead of fall," Lee said in a note to clients.

Inflation pressures have been well contained since the recession despite strong gains in employment over the past year. That has given the Federal Reserve the leeway to keep interest rates at a record low for more than six years in an effort to boost a sub-par economic recovery.

"The Fed can't wait forever before beginning to raise interest rates from near zero," Paul Ashworth, chief US economist at Capital Economics, said in a research note that pegged September for a rate hike.