Core inflation jumped a sharp 0.3 percent in December, reports show

Overall U.S. consumer prices rose a scant 0.1 percent in December, slowed by falling energy prices. But a closely watched gauge called core inflation which excludes the volatile categories of food and energy

surged 0.3 percent, the most in 11 months.

The rise in core inflation grabbed attention in financial markets, where investors have been sending bond yields up in recent days out of concern that rising inflation may prompt the Federal Reserve to accelerate the pace of its interest rate hikes. The yield on the two-year Treasury note surpassed 2 percent for the first time since the peak of the financial crisis in late 2008 after the inflation report was released Friday by the Labor Department.

The 0.3 percent seasonally adjusted jump in core inflation was the biggest since an identical increase in January 2017. Over the past six months, core inflation has recorded more benign monthly readings of 0.1 percent or 0.2 percent.

Paul Ashworth, chief U.S. economist at Capital Economics, said the inflation report bolstered his view that the Fed will accelerate rate increases this year. He said he expected the next rate hike to occur in March, with a total of four increases coming this year as inflation strengthens. Last year, the Fed raised its key short-term rate three times.

The Fed has been trying, so far unsuccessfully, to increase average annual inflation to its target rate of 2 percent.