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

Minneapolis (CNN) It’s been a couple of years of putting up with agonizingly high prices, but the light at the end of the tunnel is getting a little brighter for consumers.

Annual inflation continued its slow but steady deceleration in April, according to the latest Consumer Price Index released on Wednesday.

The consumer price index rose 4.9% for the 12 months ending in April, according to the Bureau of Labor Statistics, marking a slightly slower pace of growth. from 5% in March. It was lower than economists’ expectations for the number to remain unchanged.

It is the tenth consecutive month that the headline CPI rate has slowed, and it is at its lowest level since April 2021 – when this bout of painfully high inflation began to pick up.

Excluding food and energy costs, which tend to be more volatile, core CPI was unchanged at 5.5% for the 12 months ending in April.

On a monthly basis, both the main and fundamental indicators posted an increase of 0.4%, matching the expectations of economists, some of whom expected higher fuel and used car prices to provide some upward pressure.

“The situation is sticky and bumpy, but make no mistake, inflation is cooling,” Gregory Daco, EY’s chief economist, said in a statement.

Some (minor) relief for consumers

April data showed that the largest monthly gains seen in major categories came from used cars and trucks (up 4.4% from March but down 6.6% year-on-year); and gasoline (up 3% from March but down 12.2% annually). Gas prices, which usually rise in April due to higher travel activity, rose in April thereafter OPEC+ announced a sudden production cut.

Shelter costs, which account for a large part of the CPI — about a third of the headline and 40% of the core — also rose, rising 0.4% for the month, the smallest monthly increase since January 2022. That big category is expected to “turn around.” Later this year will more closely reflect the declines seen in the rental market, economists say. There is a significant lag in how CPI calculates rents versus how they behave in the market because of the infrequent timing of when the BLS collects data, as well as when rents change in lease contracts.

A welcome — albeit slight — drop came in the grocery price category, which fell 0.2% over the month, helping push the annual inflation rate there to 7.1%. It is the second month in a row that household food prices have declined. Daco noted that overall food price inflation (which includes higher prices in restaurants) was flat for a second month, making it the weakest consecutive reading since mid-2019.

Prices of basic commodities continued to decline on a monthly basis such as meat, fruits, vegetables and dairy products.

The Eye of the Beholder report

It’s been two years now, Americans’ budgets It has been curtailed due to high inflationwhich peaked last summer at a 40-year high and has slowly declined amid a drawn-out Fed rate hike campaign. Since March last year, the US central bank has raised its benchmark interest rate 10 times in an effort to quell inflation by stifling demand.

These anti-inflationary efforts make it more expensive and more difficult to borrow money, buy a house, buy a car, or grow a business.

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

“This sounds like another ‘eye of the beholder’ report with some good news for both sides of the inflation debate — whether or not we’re seeing enough downside for the Fed to stop,” said Andrew Patterson, chief economist at Vanguard Investment Strategy Group.

The Fed’s next policy-making meeting is a month from now. Markets are putting an 87% chance that central bankers will pause on a rate hike at the June meeting, according to CME FedWatch tool Wednesday morning.

“The Fed cannot yet declare victory on the inflation front,” said Ryan Sweet, chief US economist at Oxford Economics. “They won’t be able to declare victory for some time. It will be several more months before we start to see a lot of relief on the inflation front.”

The Fed pays close attention to how inflation behaves in the services sector. Where price hikes can become “flat” And it does not decline quickly, because it is more related to the growth of workers’ wages. the “super core” A measure of service inflation that excludes housing slowed in April to 5.2% year over year, said Megan Green, chief global economist at the Kroll Institute.

“It was at least going in the right direction,” she said.

Between now and the June meeting, the Fed will get additional readings on inflation, housing, production and the labor market. On Thursday, that data will include the latest edition of producer price inflation (which has cooled considerably in recent months) and unemployment claims (which is directed upwards).

“I think the Fed will stay mortgaged for now, and keep interest rates where they are until the end of the year,” Green said.

“This report does little to change that. Inflation has always been way down; this report was in the right direction, but that doesn’t mean next month won’t be in the wrong direction.”