US consumer prices increase solidly in April
US CONSUMER prices increased in April on higher petrol costs and rents, while underlying inflation remained strong as used motor vehicle prices rebounded, potentially ensuring that the Federal Reserve keeps interest rates elevated for a while.
The consumer price index (CPI) rose 0.4 per cent last month after gaining 0.1 per cent in March, the Labor Department said on Wednesday (May 10). In the 12 months through April, the CPI increased 4.9 per cent after advancing 5.0 per cent on a year-on-year basis in March.
The annual CPI peaked at 9.1 per cent last June, which was the biggest increase since November 1981, and is subsiding as last year’s initial surge in energy prices following Russia’s invasion of Ukraine drops out of the calculation.
Economists polled by Reuters had forecast the CPI climbing 0.4 per cent last month and increasing 5.0 per cent year on year.
Petrol prices rose last month after Saudi Arabia and other Opec+ oil producers announced further oil output cuts.
But oil prices have since been largely trending lower, pushing petrol costs down as risks of a recession have increased because of the Fed’s punitive rate hikes, tightening credit conditions and an impasse over raising the federal government’s borrowing cap.
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The inflation data followed last Friday’s employment report, which showed an acceleration in job and wage growth in April as well the unemployment rate falling back to a 53-year low of 3.4 per cent.
It is one of two reports that US central bank officials will have in hand at their Jun 13 to June 14 policy meeting. Higher inflation and labour market resilience make it unlikely that the Fed will start cutting interest rates this year, as currently expected by financial markets.
The central bank raised its benchmark overnight interest rate by another 25 basis points (bps) to the 5.00 per cent to 5.25 per cent range last week, and signalled it may pause its fastest monetary policy tightening campaign since the 1980s, though it kept a hawkish bias. The Fed has hiked its policy rate by 500 bps since March 2022.
Excluding the volatile food and energy components, the CPI increased 0.4 per cent last month, matching March’s gain. The core CPI was lifted by used cars and trucks, which increased for the first time since last June.
Though rents continued to put upward pressure on the core CPI, rental inflation is poised to ease.
The government reported last week that the rental vacancy rate increased to a two-year high in the first quarter. Also, independent measures have been showing rents on a downward trend and rent measures in the CPI tend to lag the independent gauges.
In the 12 months through April, the core CPI gained 5.5 per cent after advancing by 5.6 per cent in March. REUTERS
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