Politics

Inflation hit 8.3 percent in April compared to last year, showing signs of leveling off


The inflation rate was little changed in April, a potential sign that the rapid growth in the cost of goods and services may soon taper off.

Consumer prices rose 0.3 percent in April after rising 1.2 percent in March, according to data released by the U.S. Bureau of Labor Statistics on Wednesday. In April, the inflation rate grew 8.3 percent compared to one year ago. The number in March was 8.5 percent.

April’s core inflation measure — the change in the price of goods and services not including food and energy — was 0.6 percent compared to 0.3 percent one month ago in March.

The numbers indicate that inflation, which has been sitting at a 40-year high since December 2021, is showing signs of cooling off.

Still, households still feel the squeeze of rising prices. Gas prices hit all-time highs this week — recent information not reflected in the new data.

Following the BLS report Wednesday, economists said they remain concerned that prices are not decelerating as rapidly as hoped.

“The pace of price increases moderated, but not as much as expected,” said Greg McBride, chief financial analyst at financial services group Bankrate.com, in a note following Wednesday’s release.

“Excluding a decline in energy prices — which appears outdated by this point — the increases remain widespread. With the annual rate ticking down from 8.5 percent to 8.3 percent, it can be tempting to say we’ve seen the peak, but we’ve also been head-faked before as was the case last August.” 

The pick up in core inflation in April could mean the Federal Reserve will consider increasing interest rates more aggressively, said Andrew Hunter, senior U.S. economist at Capital Economics research group.

“Overall, the April data will probably strengthen the Fed’s resolve to continue hiking rates by (0.5 percent) at the next couple of meetings — and could lead to renewed speculation about a (0.75 percent) hike or an inter-meeting move,” Hunter wrote in a new note to clients. “But with goods shortages tentatively easing and signs that wage growth is set to cool, we still think a more pronounced drop back in inflation will allow officials to slow the pace of tightening in the second half of the year.”

The Fed has previously indicated that 0.75-percent interest rate hikes are not being considered.

The Biden administration and the Federal Reserve have both framed inflation as the top economic concern nationally. Last week, the Federal Reserve announced it had raised its key interest rate by 0.5 percent as part of its ongoing effort to cool off the economy, and more rate hikes are expected.

President Joe Biden spoke on Tuesday about inflation, highlighting steps his administration has taken to ease the burden on Americans, though he did not announce any new policy initiatives to address the issue. Biden called the current inflationary environment a global problem, pointing to the war in Ukraine and pandemic-related supply chain issues for rising costs.

“We’re seeing historic inflation in countries all over the world,” Biden said.

In a note published before Wednesday’s data release, Bankrate.com chief financial analyst Greg McBride highlighted housing, which he said accounts for 40 percent of the Consumer Price Index — “as it does for many household budgets,” McBride said, referring to the portion of household income that families spend to keep a roof over their heads.

“With double-digit increases in rents kicking in, this puts the household budget in a vise even if food and energy costs level out,” he said.

McBride also noted mortgage rates have jumped more than 2 percentage points thus far in 2022.

“Until we see sustained evidence of easing inflation pressures, the risk is to the upside,” he said. “However, when we do see inflation pressures simmer down, mortgage rates will reverse course quickly — particularly if the economy is slowing, too.”

Wednesday’s inflation numbers arrive as signs of moderating price growth emerge elsewhere. Last week, the BLS reported monthly wage growth had decelerated to 0.3 percent from 0.5 percent, though on an annual basis it was unchanged at 5.5 percent growth. And although mortgage prices have climbed this year, the 30-year mortgage interest rate fell from 5.64 percent last week to 5.4 percent this week.

At least one economist believes inflation peaked in March. In a note to clients Tuesday, Ian Shepherdson, chief economist at Pantheon Macroeconomics research group, said that while at least one more 0.5 percent rate hike is likely for June, the Fed may pause in July.

“Fed officials will remain cautious, because they know the decline in inflation will slow in the third quarter,” Shepherdson said. “But the pressure on policymakers to continue hiking by [one-half percent] per meeting won’t be sustained at its current fever-pitch when inflation is falling,” he said.





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