Inflation jumped 0.4% in April as prices remain stubbornly high
Consumer price index moderates to 4.9% in April but inflation remains painfully high
Inflation rose again in April despite an aggressive interest-rate hike campaign by the Federal Reserve, indicating that strong underlying price pressures are still bubbling beneath the surface of the economy – and continuing to burden millions of Americans.
The Labor Department said Wednesday that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 0.4% in April from the previous month, much faster than the 0.1% increase recorded in March.
Prices climbed 4.9% on an annual basis, slightly below the 5% increase forecast by Refinitiv economists.
Although inflation has cooled from a peak of 9.1%, it remains about more than double the pre-pandemic average and well above the Fed's 2% target rate.
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Other parts of the report also pointed to a slow retreat for inflation, a worrisome sign for the Federal Reserve. Core prices, which exclude the more volatile measurements of food and energy, climbed 0.4%, or 5.5% annually. That is a slight drop from the 5.6% increase in March, but it marked the fifth straight month that core prices climbed 0.4% or more.
"Inflation has moved beyond sticky at this point and after three months of core CPI hanging above 5%, it’s become tenacious," said Robert Frick, corporate economist with Navy Federal Credit Union. "Given the biggest contributor to high CPI once again was shelter, and home sales prices have hit their own plateau, we may not see significant drops in CPI until this fall."
Stocks jumped after the data was released.
Fed policymakers are closely watching the report for evidence inflation is finally subsiding as they try to cool the economy with a series of rapid interest rate hikes. Officials approved a 10th consecutive rate increase last week, lifting the benchmark federal funds rate to a range of 5% to 5.25%, the highest since 2007.
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Central bankers also opened the door to a long-awaited pause in the tightening cycle, although they stressed that it hinged on upcoming economic data. There will be one more CPI report released before officials next meet on June 14. Markets widely expect the Fed to hit pause on its tightening cycle next month.
"While inflation rates remain persistently elevated, the modest slowing provides the Fed room to pause its rate hikes," said Nationwide chief economist Kathy Bostjancic. "We continue to believe that inflation will maintain a gradual improvement throughout this year and the Fed will be on hold during that time."
Scorching-hot inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.
There was some good and bad news in the report: Gas prices spiked 3% in April after OPEC unexpectedly slashed oil production. However, the cost of gasoline is still down about 12.2% when compared with April 2022, when energy prices skyrocketed following Russia's invasion of Ukraine.
The price of used cars and trucks, meanwhile, jumped 4.4% in April, reversing recent declines.
Other price gains also proved persistent and stubbornly high in April: Shelter costs, which account for about 40% of the core inflation increase, rose 0.4% for the month and are up 8.1% over the past year. It was the largest contributor to the monthly increase, the Labor Department said in the report.
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In some welcome news for consumers, the cost of groceries fell 0.2% in April, although food is still far more expensive than it was one year ago. Despite the decrease, consumers continued to pay more for items like cereal, rice, beef and veal, ham, chicken and fresh vegetables including lettuce.