Inflation eased in April as declines in grocery and used car prices offset another rise in rent and gasoline.
After inflation picked up notably early this year, the report revealed more progress in the battle to tame prices, with an underlying inflation measure reaching a three-year low. Still, it may not be enough to convince the Federal Reserve to lower interest rates in the next couple of months.
Overall prices increased 3.4% from a year earlier, down from 3.5% in March, according to the Labor Department’s consumer price index. On a monthly basis, costs rose 0.3%, below the 0.4% rise the previous month.
What is core inflation in the USA right now?
Core prices, which strip out volatile food and energy items and are watched more closely by the Fed, increased 0.3%, below March’s 0.4% bump. That pushed down annual inflation from 3.8% to 3.6%, the lowest since April 2021.
Is inflation expected to go down?
After easing rapidly last year, inflation unexpectedly accelerated in the first quarter but is still down substantially from a 40-year high of 9.1% in June 2022.
As pandemic-related supply chain troubles have resolved, goods such as used cars, furniture and appliances – whose prices soared during the health crisis – have gotten less expensive. But the cost of services such as rent, car insurance and repairs, and recreation have steadily drifted higher. That’s partly because wage growth is slowing just gradually following COVID-induced labor shortages.
By December, Barclays expects yearly inflation to slow to 3.1% and the core CPI measure to fall to 3.3% – still well above the Fed’s 2% goal.
Are interest rates expected to drop?
As recently as late March, the Fed was forecasting three rate cuts this year after price increases had slowed dramatically in 2023. From March 2022 to July 2023, the Fed raised its benchmark short-term rate from near zero to a 23-year high of 5% to 5.25% to subdue inflation.
But a third straight month of hot inflation in March 2024 led Fed Chair Jerome Powell and other central bank officials to proclaim that rates will likely stay higher for longer as they await a more sustainable move to the Fed’s 2% target.
Powell repeated that message at a conference in Amsterdam on Tuesday, saying, “We’ll need to be patient and let restrictive policy do its work.”
After a report early this month showed that employers added a solid 175,000 jobs in April – a big downshift from the first quarter – some economists said it may have revived hopes for more rate cuts. But Powell on Tuesday called the labor market “very, very strong.”
The futures market now foresees the Fed’s first rate cut in September and another in December. Before the inflation flare-up, it was betting on an initial cut in June and a total of three decreases in 2024.
Why are US gas prices rising again?
Gasoline prices rose 2.8% in April, the third straight increase after four straight monthly declines. Demand is picking up as the spring driving season gears up and refiners switch to more expensive summer blends.
This article originally appeared on USA TODAY: CPI report shows inflation slowed in April
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