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The Labor Department said on Friday its Consumer Price Index increased 0.4 percent after rising 0.5 percent in March. The increase was in line with economists' expectations.

Core CPI -- excluding food and energy - gained 0.2 percent after edging up 0.1 percent in March and also in line with economists' expectations.

The monthly increase in core CPI has been bouncing around 0.1 percent and 0.2 percent since November. The core reading is closely watched by the U.S. central bank as a guide to monetary policy.

In the 12 months to April, core CPI was up 1.3 percent, the biggest rise since February 2010, after increasing 1.2 percent in March. Fed officials, however, would like to see that closer to 2 percent.

"This is not enough to prompt an immediate response from the Federal Reserve but they're certainly watching this. It is still our view that when QE2 ends in June the next move from the Fed will be a tightening move," said Dana Saporta, an economist at Credit Suisse in New York.

Saporta was referring to the Fed's $600 billion government bond purchasing program, also known as quantitative easing, aimed at stimulating the economy through low interest rates.

Fed officials believe high commodity prices, which undercut economic growth in the first quarter, will not have a lasting effect on inflation.

U.S. government debt prices and stock index futures edged higher on the data.

Gasoline prices accounted for almost half of the rise in overall consumer inflation last month, advancing 3.3 percent.

The pace of increase, however, slowed from March's 5.6 percent rise and further declines are likely after U.S. gasoline futures registered their sharpest daily drop since September 2008 on Wednesday and slipped further on Thursday.

Last month, food prices rose 0.4 percent after increasing 0.8 percent in March.

High gasoline prices are squeezing consumers, whose incomes are not keeping up with inflation. Average weekly earnings, adjusted for inflation, fell 0.3 percent in April after declining 0.4 percent in March, the Labor Department said.

Rising costs for housing, new vehicles, used trucks and medical costs bumped up core inflation last month. Shelter costs, which account for about 40 percent of core CPI, rose 0.1 percent, rising by the same margin for a seventh straight month.

Prices for new vehicles rose 0.7 percent last month, likely reflecting tight inventories as a shortage of parts in the wake of the devastating earthquake and tsunami in Japan disrupts production. They increased by a similar margin in March.

Apparel prices rebounded 0.2 percent from a 0.5 percent fall in March.

Overall consumer prices rose 3.2 percent year-on-year, the most since October 2008, after rising 2.7 percent in March.

(Additional reporting by Emily Flitter in New York; Editing by Andrea Ricci)