NEW YORK (CNNMoney.com) - Higher gasoline prices pushed inflation higher in March, the government reported Wednesday, but even stripping out food and energy there was surprising upward pressure on consumer prices last month.

The Consumer Price Index jumped 0.4 percent in March, up from a 0.1 percent rise in February, the Labor Department reported. The latest reading was in line with forecasts of economists surveyed by Briefing.com.

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But the so-called core CPI, which excludes often-volatile food and energy prices, rose 0.3 percent in the month after rising 0.1 percent in February. Economists had forecast only a 0.2 percent rise for the most recent period.

The report could be a warning sign that higher energy prices are starting to bleed over into the prices of other products. The rise was the biggest one-month increase in the core CPI since March 2005.

Energy prices jumped 1.3 percent last moth after falling 1.2 percent in February. Gasoline prices leapt 3.6 percent. And both gasoline and energy prices have risen further since the March readings.

Overall, retail prices are up 3.4 percent over the last 12 months, the same rate as increases in average hourly earnings over that period.

The core CPI, meanwhile, is up 2.1 percent over the last 12 months, the same year-over-year increase seen in both January and February. Economists say that's the upper end of the comfort range for policy-makers at the Federal Reserve.

On Tuesday, the Fed released minutes of its most recent meeting, which suggested policy-makers are getting close to ending nearly two years of steady increases in the fed funds rate. Stocks and bonds rallied on those minutes.

But bond prices fell after the CPI report, sending the yield on the 10-year Treasury back over 5 percent. Stocks treaded water after futures had pointed to a higher open on strong earnings reports before the CPI report.

Economist Robert Brusca said that only about half the items the Labor Department tracks outside of food and energy saw higher prices last month. But when looking over the last three or six months, he noted there were broader signs of price increases.

"Both services and commodities inflation flared on the month; their three-month rise shows some accelerating tendency," he wrote in a note to clients. "All in all this was not a good report. And oil prices have continued to rise in April. Yesterday's ebullience on the Fed is due for a rethink - already."

It's taken as a given on Wall Street that the Fed will raise rates another quarter-percentage point at its May 10 meeting, no matter Wednesday's CPI report. The central bank's policy makers will get to see two more months of inflation numbers before their meeting in late June.

But Mathew Smith, vice president of Smith Affiliated Capital, was less concerned about growing price pressures.

"If you look at inflation post-Katrina, we're actually trending down, not up," he said. "When you look at what boosted core CPI, it was hotels, apparel and air fares."

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