US consumer prices slow down in April; but inflation is still high

By Lucia Mutikani

WASHINGTON (Reuters) – The rise in U.S. consumer prices slowed sharply in April as gasoline prices fell from record highs, suggesting inflation may have peaked, though it is possible remain high for a while and lead to the Federal Reserve maintaining its path of monetary tightening.

The consumer price index (CPI) rose 0.3% in April, the smallest increase since last August, the Labor Department said on Wednesday. The figure contrasted sharply with the 1.2% monthly increase in the CPI in March, which was the biggest advance since September 2005.

But the CPI slowdown is likely to be temporary. Gasoline prices, which accounted for most of the pullback in the monthly rate of inflation, are rising again and hovered around $4,161 a gallon earlier in the week, after falling below $4 in April, according to the Administration. of Energy Information (EIA).

Russia’s war against Ukraine is the main catalyst for rising gasoline prices. The conflict has also pushed up global commodity prices.

Inflation was already a problem before the invasion of Ukraine on February 24 due to strained global supply chains as economies emerged from the COVID-19 pandemic, after governments around the world pumped in huge amounts of money. relief and central banks cut interest rates.

US President Joe Biden on Tuesday acknowledged the impact high inflation is having on American families, saying lowering prices «is my top national priority.»

The Fed last week raised its policy rate by half a percentage point, the biggest increase in 22 years, and said it will start cutting bond holdings next month. The entity began raising rates in March.

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In the 12 months through April, the CPI rose 8.3%. While that was the first slowdown in the annual CPI since last August, it marked the seventh straight month of increases above 6%. The CPI soared 8.5% in March, the biggest year-over-year rise since December 1981.

Economists polled by Reuters had forecast consumer prices rising 0.2% in April and 8.1% year-on-year.

While monthly inflation is likely to pick up, annual readings may decline further as last year’s big gains are left out of the calculation, but remain above the Fed’s 2% target, at least through 2023. .

Experts see China’s zero-tolerance policy against COVID-19 as putting more pressure on global supply chains, driving up prices of goods. Prices for services such as air travel and hotel accommodation are also expected to keep inflation high amid strong summer demand and a shortage of workers.

Strong increases in rentals, airfares and new car prices boosted core inflation last month.

Excluding volatile food and energy components, the CPI rebounded 0.6% after rising 0.3% in March. The so-called core CPI rose 6.2% in the 12 months to April. The reading follows the 6.5% jump in March, which was the biggest gain since August 1982.

(Edited in Spanish by Marion Giraldo)