U.S. inflation accelerated in April but likely remained low enough for the Federal Reserve to pause its year-long campaign of interest rate hikes at its next meeting in June.
Compared with the previous month, consumer prices rose 0.4 percent after climbing 0.1 percent in March from February. This was in line with what economists had forecast.
The consumer-price index, a key barometer of what consumers pay for goods and services, rose 4.9 percent last month from a year earlier, ticking down from March’s five percent annual increase, the Labor Department said Wednesday. Economists had expected the CPI would rise five percent, holding steady with the previous month. So on a year-over-year basis, the headline figure was slightly better than expected.
I was bracing myself for this month’s CPI report, but it was actually very encouraging. Inflation is falling, even as the economy continues to add jobs and unemployment continues to fall. https://t.co/Pl42RE29Z6
— Julia Pollak (@juliaonjobs) May 10, 2023
Inflation has slowed since hitting 8.9 percent in June of 2022 but remains well above the Fed’s goal of two percent. The Fed uses a different measure of inflation—the personal consumption expenditure price index, which is calculated by the Commerce Department—for its target. In March, the latest data available, this index fell to 4.2 percent from 5.1 percent in February.
Progress in taming inflation has been slower than many Fed officials and economists expected. The most recent set of projections from Fed officials indicated that they expect PCE inflation will fall to 3.5 percent by the end of the year.
“American families continue to suffer the pains of inflation because the government obstinately continues with its misguided policies, chiefly excessive spending. While inflation has come down from a 40-year high, it is now accelerating, and Americans are hurting financially,” said Heritage Foundation economist and research fellow EJ Antoni.
Core CPI, which excludes volatile food and fuel prices, also rose 0.4 percent for the month. This was also as expected. On a 12-month basis, core prices were up 5.5 percent, also in line with expectations.
In what will be a great relief for many American families, prices of food at home fell 0.2 percent compared with March. Prices of dining out, however, rose 0.4 percent. Gasoline prices jumped three percent in April but other energy prices fell. Overall energy prices climbed 0.6 percent.
Still, incomes have lagged behind inflation, leaving households worse off in terms of spending power.
“Since Biden took office, the average family has seen its weekly income rise by $200, nearly 10 percent, but prices have risen more than 15 percent in that same time. Consequently, the family’s larger income buys $100 less in real terms,” Antoni said.
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