US consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year.

The increase strengthened expectations that price pressures will accelerate this year and prompt a faster pace of interest rate increases from the Federal Reserve. 

The fairly strong inflation report from the Labor Department today could put more pressure on US financial markets, which were spooked by a surge in annual wage growth in January. 

Inflation concerns sparked a sell-off on Wall Street. 

There are fears that inflation, which is seen as being driven by a tightening labour market and increased government spending, could force the Fed to be a bit more aggressive in raising rates this year than is currently anticipated. 

That would slow economic growth.

The US Fed has forecast three rate hikes for this year, with the first increase expected in March. 

The Labor Department said today that its Consumer Price Index increased 0.5% last month as households paid more for petrol, rental accommodation and healthcare. The CPI had risen by 0.2% in December. 

The year-on-year increase in the CPI was unchanged at 2.1% as the large price gains from last year dropped out of the calculation. 

Excluding the volatile food and energy components, the CPI rose by 0.3% - he largest increase since January 2017 and after a 0.2% rise in December. 

The year-on-year rise in the so-called core CPI was unchanged at 1.8% in January, also because of less favourable base effects. 

Economists polled by Reuters had forecast the CPI increasing 0.3% in January and the core CPI rising 0.2%. 

The core CPI is viewed as a better measure of underlying inflation trends. The Fed tracks a different index, the personal consumption expenditures price index excluding food and energy, which has consistently undershot its 2% target since mid-2012.