US consumer price inflation slows but inflation remains elevated

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WASHINGTON, May 11 (Reuters) – U.S. consumer price growth slowed sharply in April as gasoline prices hit record highs, suggesting inflation is likely to have peaked, although it should remain elevated for some time and keep the Federal Reserve’s foot on the brakes. to cool demand.

This aspect was reinforced by Wednesday’s Labor Department report, which also showed that underlying monthly inflationary pressures were building up again after a brief lull in March, as airfare prices recorded their highest. strong increase never recorded. Rents have risen the most since 2006.

“The country’s fight against high inflation is not over yet, but markets can still breathe a sigh of relief as the situation does not worsen,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The Fed can stick to its plan with 50 basis point rate hikes at the next two meetings in June and July and there is no reason to move faster to fight inflation.”

The consumer price index rose 0.3% last month, the smallest rise since last August, as gasoline prices fell 6.1% after climbing 18.3% in March . This contrasted sharply with the 1.2% month-over-month rise in the CPI in March, which was the largest gain since September 2005. The decline in gasoline blunted a 0.9 % of food prices.

But the deceleration in the monthly CPI is likely temporary. Gasoline prices are rising again and were around $4.161 a gallon at the start of the week after falling below $4 in April, according to the Energy Information Administration.

Russia’s unprovoked war against Ukraine is the main catalyst for soaring gasoline prices. The war has also pushed up world prices for goods.

Inflation was already a problem before Moscow invaded Ukraine on February 24 due to the stretching of global supply chains as economies emerged from the COVID-19 pandemic after world governments around the world have injected large sums of money into pandemic relief and that central banks have cut interest rates.

President Joe Biden on Tuesday acknowledged the pain that high inflation is inflicting on American families and said bringing prices down “is my top national priority.”

Last week, the Fed raised its key rate by half a percentage point, the biggest hike in 22 years, and said it would start reducing its bond holdings next month. The US central bank began raising rates in March.

US stocks were higher. The dollar fell against a basket of currencies. US Treasury yields rose.

ANNUAL INFLATION REACHED A PEAK

In the 12 months to April, the CPI rose 8.3%. Although this is the first deceleration in the annual CPI since last August, it is the seventh consecutive month of increases above 6%. The CPI jumped 8.5% in March, the biggest year-on-year rise since December 1981.

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

While monthly inflation will likely rise, annual readings are expected to decline further as last year’s large increases are discounted but remain above the Fed’s 2% target at least. until 2023.

China’s zero-tolerance policy on COVID-19 appears to be putting more pressure on global supply chains, driving up commodity prices. Prices for services such as air travel and hotel accommodation are also keeping inflation high amid both strong demand over the summer and a shortage of workers.

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

A key measure of rents, the owner’s equivalent rent of the principal residence, jumped 0.5% last month. This is the largest gain since June 2006 and follows a 0.4% increase in March.

Underlying inflationary pressures were also fueled by air fares, which soared a record 18.6% and new motor vehicle prices which rose 1.1%. Accommodation in hotels and motels also cost more last month, as did recreation and furnishings.

Americans also paid more for health care, with the cost of hospital services rising 0.5% and doctor visits rising 0.2%, but prescription drug prices remained unchanged. There was some respite from high inflation, with clothing prices falling 0.8%.

The biggest decline since May 2020 ended six consecutive months of increases. Communication costs fell for a third consecutive month, while prices for used cars and trucks fell 0.4%.

Reporting by Lucia Mutikani; Editing by Dan Burns and Andrea Ricci


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