CPI report: Annual inflation last month cooled to lowest level since April 2021

Minneapolis (CNN) It has endured two years of high prices, but the light at the end of the tunnel is looking a little brighter for consumers.

Annual inflation continued its slow but steady decline, according to the latest consumer price index released on Wednesday.

The Bureau of Labor Statistics says the CPI rose 4.9% in the 12 months ending in April, indicating a slightly slower increase. than 5% in March. The figure was below economists’ expectations that it would remain unchanged.

This is the 10th consecutive month the headline CPI rate has fallen, and the lowest rate since April 2021 – when this painful inflation started to pick up.

Core CPI, which excludes food and energy spending, which tends to fluctuate more, was unchanged at 5.5% in the 12 months ended April.

On a monthly basis, both the headline and major indexes posted a 0.4% increase, matching the forecasts of economists, some of whom expected more fuel and put some upward pressure on car prices.

“It’s been sticky and bumpy, but make no mistake, inflation is cooling,” Gregory Dago, chief economist at EY, said in a statement.

Some (minor) relief for consumers

Data for April showed that the biggest monthly gains among major categories came from used cars and trucks (up 4.4% from March but down 6.6% year-over-year); and gasoline (up 3% from March but down 12.2% year-on-year). Gas prices, which normally rise in April due to higher travel activity, rose in April OPEC+ Announces Surprise Production Cuts.

Accommodation costs, which account for a good share of the CPI – a third in the core index and 40% in the core – also rose 0.4% month-on-month, the smallest monthly increase since January 2022. Economists say the larger category is expected to “turn around” later this year and more closely mirror the decline seen in the rental market. There is a significant lag in how the CPI calculates rents versus how the market is performing because of the timing of when the BLS collects the data, and when rents change across leases.

A welcome decline – albeit slight – came in the grocery category, which fell 0.2% on the month, helping bring the annual inflation rate to 7.1%. Household food prices fell for the second month in a row. Overall food inflation (which includes higher prices at restaurants) was flat for a second straight month, making it the softest reading since mid-2019, Daco noted.

Prices of staple food items such as meats, fruits and vegetables and dairy products continued to decline on a monthly basis.

A ‘viewer’ report

Now that two years are going on, Americans’ budget Crushed by high inflationIt hit a 40-year high last summer and has been slowly coming down amid a protracted Federal Reserve Fare hike campaign. Since March last year, the US Federal Reserve has raised interest rates 10 times in an attempt to curb inflation by curbing demand.

Those efforts to reduce inflation make it more expensive and difficult to borrow money, buy a home, buy a car or grow a business.

Federal Reserve Chairman Jerome Powell has warned that the downward path for inflation will be slow and flat, and that it will “take some time” for the annual rate of inflation to return to a more stable level.

Andrew Patterson, senior economist at Vanguard’s investment strategy group, said: “This looks like another ‘watchdog’ report with some good news for both sides of the inflation debate – whether or not we see enough of a downward trend for the central bank to pause.”

The central bank’s next policy-making meeting is a month away. Markets are pricing in an 87% chance that central bankers will hold off on rate hikes at that June meeting. CME FedWatch tool Wednesday morning.

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“The Fed can’t yet declare victory on the inflation front,” said Ryan Sweet, chief US economist for Oxford Economics. “They won’t be able to declare victory for some time. It will be several months before we start seeing much relief on the inflation front.”

The central bank is closely watching how inflation plays out in the services sector. Price hikes are “sticky” And don’t decrease quickly because they are so tied to workers’ wage growth. The “Super Core” A measure of services inflation eased to 5.2% year-on-year in April, said Megan Greene, global chief economist at the Kroll Institute.

“It’s at least going in the right direction,” he said.

Between now and that June meeting, the Fed will receive additional readings on inflation, housing, manufacturing and the labor market. On Thursday, that data will include the latest prints on producer price inflation (It has cooled significantly in recent months) and unemployment claims (are upward trending)

“I think the Fed will hold the bat for now and keep rates on hold until the end of the year,” Green said.

“This report didn’t do much to change that. Inflation is always flat on a downward path; this report was in the right direction, but that doesn’t mean it won’t be in the wrong direction next month.”

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