April inflation hits 3.8%, reducing US spending power
A key inflation gauge accelerated in April to the highest level in three years, indicating that rising petrol prices and increased food costs are putting pressure on Americans’ finances. Inflation surged to 3.8% in April relative to the same month last year, as reported by the Commerce Department on Thursday. This marks an increase from 3.5% in March and represents the highest rate observed since May 2023. On a monthly basis, prices increased by 0.4%, a decrease from the 0.7% rise observed in March.
The report indicated that prices have increased for numerous items beyond petrol, suggesting that inflation may endure and present challenges for congressional Republicans in the upcoming midterm elections. Inflation remains significantly elevated beyond the Federal Reserve’s 2% target, suggesting that Fed policymakers might opt to refrain from implementing any reductions to their primary short-term interest rate this year. Some officials have indicated that their forthcoming action may lean towards an increase rather than a decrease.
Excluding the volatile food and energy categories, core inflation increased to 3.3% in April, up from 3.2% in the preceding month. It represents the peak core figure observed since November 2023. One positive sign in the report is that core prices increased by a modest 0.2% in April compared to March. Higher prices are exerting pressure on consumers’ incomes, which remained stable in April compared to March. In real terms, incomes experienced a decline of 0.1% in the previous month.
