CPI shows the ongoing impact of energy price rises
U.S. consumer prices rose 3.8% annually in April, the highest rate since May 2023, according to data released Tuesday by the Bureau of Labor Statistics. The monthly gain came in at 0.6%, easing from the 0.9% increase recorded in March. The annual reading exceeded the Dow Jones consensus estimate of 3.7% and was up from 3.3% in March.
Prior to the late-February U.S.-Israeli strikes on Iran and Tehran's subsequent closure of the Strait of Hormuz, the annual inflation rate had stood at 2.4%, according to CNN.
Energy and food
The energy index rose 3.8% for the month, accounting for more than 40% of the overall monthly increase, according to the BLS. On an annual basis, energy costs climbed 17.9%. Gasoline prices rose 5.4% in April and are up 28.4% year over year. The national average for a gallon of regular gasoline was US$4.50 as of Tuesday, according to the AAA motor club, as reported by The Associated Press via BNN Bloomberg. Fuel oil prices rose 54.3% annually, and airline fares were up 20.7% over the same period.
Food prices increased 0.5% for the month, with the food-at-home index up 0.7% — its largest monthly gain since August 2022, according to the AP. Annually, food costs rose 3.2%, with beef prices up 14.8% year over year, per CNBC. Shelter costs rose 0.6% for the month and 3.3% annually.
Excluding food and energy, core CPI rose 0.4% month over month and 2.8% annually, above the consensus forecast of 2.7%. Apparel prices rose 0.6% and household furnishings were up 0.7%. New vehicle prices fell 0.2% and medical care costs dipped 0.1%.
Wages and rates
Real average hourly wages fell 0.3% on an annual basis in April, the first year-over-year decline since April 2023, according to the BLS.
Following the release, futures traders raised the probability of a Fed rate hike by year-end to approximately 30%, according to CME Group data cited by CNBC. Markets had earlier priced in at least one rate cut in 2026.
"Given that inflation is heading in the wrong direction and the labour market is holding up, it's very unlikely that the Fed will be able to lower interest rates any time soon," said Chris Zaccarelli, chief investment officer at Northlight Asset Management, in reporting by CNBC.
Kevin Warsh, U.S. President Donald Trump's nominee to succeed outgoing Fed chair Jerome Powell, is expected to be confirmed by the Senate this week, according to the AP.
The next CPI release, covering May 2026, is scheduled for June 10, 2026.
