Inflation eases to 4.9%; core inflation falls to 5.5%

Inflation slowed for a tenth straight month in April as a continued moderation in grocery costs offset rising gasoline prices.

An underlying inflation measure that captures longer-lasting trends remained elevated.

Consumer prices increased 4.9% from a year earlier, down from 5% in March and a 40-year high of 9.1% last June, according to the Labor Department’s consumer price index. That’s the smallest yearly increase since April 2021.

On a monthly basis, prices rose 0.4% following a 0.1% increase in March.

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What is the difference between core CPI and CPI?

Core prices, which exclude volatile food and energy items and capture longer-lasting trends, increased 0.4% from March following a similar rise the previous month. That lowered the annual increase from 5.6% to 5.5%.

The report reveals that the nation’s road back to normal inflation levels will be bumpy. Although goods inflation has been easing as COVID-related supply chain bottlenecks wind down, some items rose last month. Apparel prices increased and used car prices jumped after nine straight declines.

And while services prices are poised to pick up as Americans resume traveling and dining out more frequently, several of those cost increases slowed in April.

Will the Fed continue to raise rates?

Although inflation has edged down just gradually, the Federal Reserve last week signaled it now will likely pause its aggressive campaign that has hiked a key interest rate by 5 points over the past 14 months. Fed officials have said the collapse of Silicon Valley Bank and two other banks will probably toughen lending standards and dampen the economy and inflation, leaving less work for the central bank to do.

What is the future of gas prices?

In April, gas prices increased 3% but are down 12.2% from a year ago. In recent weeks, pump prices have fallen again. Nationally, regular unleaded gasoline averaged $3.53 a gallon Tuesday, down from $3.60 a month ago.

Are grocery prices going to go down?

Grocery prices edged down 0.2%, the second straight monthly drop, and the yearly rise eased to 7.1% from 8.4%. The cost of commodities such as wheat and corn has fallen in recent months because of easing global demand.

In April, the price of eggs dropped by 1.5%, the third straight monthly decline, after a string of sharp bird flu-related increases but costs are still up 21.4% over the past year. Pork prices fell 1.2%; fish and seafood costs dipped 0.7%; and bread was down 0.3%.

But some costs continued to climb. Chicken prices increased 0.5% and uncooked ground beef, 0.6%.

Restaurant prices increased by 0.4% and are up 8.6% annually.

Core Consumer Price Index

The core consumer price index is a measure of how consumer prices shift, not counting the costs of energy and food which are typically the most volatile components of the broader consumer price index. Economists expect the core consumer price index for April to show prices rose 0.3% over March, and 5.4%, year over year.

When did the Fed start raising interest rates?

The Fed raised its key short term interest rate a quarter of a percentage point last week – its tenth rate hike in a row. But it signaled that it may pause further boosts as it waits to see if its string of rate increases, and the tighter lending standards imposed after the failure of Silicon Valley Bank, do their part to tame inflation.

Silicon Valley Bank: The failure of the California institution rattled investors, consumers and regulators

Fed inflation report

The Personal Consumption Expenditure price index, the Federal Reserve’s preferred measure of inflation, comes out on May 26.

The next consumer price index report is scheduled to be released on June 13.

What is a good inflation rate?

The Federal Reserve’s target is an inflation rate of 2%. It has said that the 2% goal “is most consistent with the Federal Reserve’s mandate for maximum employment and price stability.”

Dow futures

Stock futures reversed direction and rose in pre-market trading Wednesday morning after the 8:30 inflation report showed inflation rose less than expected in April. Dow futures increased 0.18%; S&P 500 futures rose 0.33% and Nasdaq futures climbed 0.40%

Inflation rate

In March, the inflation rate was 5% on an annual basis. The pace of price increases slowed for the ninth month in a row as prices at the pump and the grocery store declined.