The Consumer Price Index rose 3.4% in April compared to the previous year, down from 3.5% in March, the Labor Department reported on Wednesday (15). The “core” index – which excludes the volatile prices of food and fuel to give a sense of the underlying trend – rose 3.6% last month, down from 3.8% the month before. It was the lowest annual increase in core inflation since early 2021.
The report comes after three consecutive months of uncomfortably rapid price increases that rattled investors and concerned officials at the Federal Reserve (Fed), the American central bank. Economists warn that one month of encouraging data is far from enough to quell those concerns. But they said the data should ease worries, at least for now, that inflation is accelerating again.
Inflation fell rapidly last year, signaling that the Fed was close to succeeding in its effort to control price increases without causing a recession, and that the bank could soon start cutting interest rates, which are currently set at around 5.3%. But progress stalled in the first three months of the year, and investors have all but lost hope for rate cuts before September.
It is unlikely that Wednesday’s inflation report will change those expectations. But it could be a step toward giving policymakers the confidence that inflation is returning to normal, which they said is necessary before they begin cutting rates. It is also likely that this new data will further reduce the already slim chances of the Fed raising interest rates instead of lowering them.
The report is a welcome pause for the White House in light of a series of bad inflation data that has been fueling voter discontent with how President Biden is handling the economy.
Source: The New York Times