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April CPI's report shows inflation keeps declining

Inflation eased slightly in April, the tenth straight month of cooling, but price gains remain historically high as the broader economy cools. The consumer price index rose 0.4% last month, pushed higher by rising shelter, used vehicle, and gas prices. The increase was in line with Wall Street expectations. On an annual basis, the inflation rate was 4.9%, slightly less than the estimate and providing some hope that the trend is lower. A widely followed measure of inflation rose in April, though the pace of the pace of the annual increase provided some hope that the cost of living will head lower later this year.

Inflation Rate

Source: U.S. Bureau of Labor Statistics

The consumer price index, which measures the cost of a broad swath of goods and services, increased 0.4% for the month, in line with the Dow Jones estimate, according to a Labor Department report this Wednesday. However, that equated to an annual increase of 4.9%, slightly less than the 5% estimate and the lowest annual pace since April 2021. Prices in March rose 0.1% on a monthly basis and 5% from the prior year. Core inflation remained especially sticky last month as rent prices continue to surge. The index for rent and the index for owners’ equivalent rose 0.6% and 0.5%, respectively, in April. Owners’ equivalent rent is the hypothetical rent a homeowner would pay.

April CPI

Source: U.S. Bureau of Labor Statistics

The shelter index increased 8.1% over the last year, accounting for over 60% of the total increase in core inflation. The energy index decreased 5.1% for the 12 months ending in April, while the food index increased 7.7% over the last year. The energy index rose 0.6% from March to April on a seasonally adjusted basis, led by a 3% rise in gas prices. Moreover, fuel oil prices fell 4.5% from the prior month on a seasonally adjusted basis. They were down 20.2% annually, while gas prices were down 12.2% on an annual basis.

Markets reacted positively to the news, with futures turning positive as Treasury yields were lower. “Today’s reports suggest that the Fed’s campaign to quell inflation is working, albeit more slowly than they would like. But for financial markets, today’s inflation print is a net positive.” Said Quincy Krosby, Chief global strategist at LPL Financial. Inflation has, indeed, been persistent despite the Federal Reserve’s efforts to bring down prices. Starting in March 2022, the central bank has enacted 10 consecutive interest rate increases totaling 5 percentage points, taking benchmark borrowing rates to their highest level in nearly sixteen years. Last week, the Fed signaled it could pause its hikes, saying it would assess incoming data ahead of its June meeting. Oren Klachin, the lead U.S. economist at Oxford Economics, wrote in reaction to Wednesday’s report, warned:

“Investors have been betting on Fed rate cuts later this year but we think that view is misguided. We think the Fed will maintain a hawkish bias through year-end and won’t hesitate to raise rates again if inflation and the labor market data surprise strongly to the upside.”

Wednesday’s inflation data comes after a strong jobs report last Friday. The report contained downward revisions to job gains for March and February, however, indicating a resilient but cooling labor market while offering investors hope the Fed may pause its hikes next month.


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