Inflation surged nearly 5% in April from the previous year, less than anticipations

May 11, 2023: A widely followed measure of inflation increased, though the pace of the increase gave hope that the cost of living will go lower this year.

According to a Labour Department report, the consumer price index limits the cost of a broad swath of goods and services, increasing 0.4% for the month, in line Dow Jones estimate.

However, that equated to an annual surge of 4.9%, below the 5% estimate and the decreased annual pace since April 2021.

Except for volatile food and energy categories, core CPI increased by 0.4% every month and 5.5% from before a year, both in line with expectations.

Increases in the shelter, gasoline and used vehicles pushed the index higher and were offset somewhat by comes down in prices for fuel oil, new cars and food at home.

Markets started positively to the news, with futures which turned positive as Treasury yields were lower.

“Today’s reports suggest that the Fed’s campaign quelling inflation is working, albeit that they would like,” stated Quincy Krosby, chief international strategist at LPL Financial. “But for financial markets, inflation which is printing, is a net positive.”

Inflation has persisted despite the Federal Reserve’s efforts to bring down prices. Beginning in March 2022, the central bank has enacted ten consecutive interest rate increases totalling five percentage points, taking benchmark borrowing prices to their highest level in nearly 16 years.

The CPI, which read, has cooled considerably from peaking at around 9% in June 2022. Therefore, inflation still has held well above the Fed’s 2% annual target.

The report gives both good and bad data on the inflation front as Fed officials think about their next rate move.

Shelter costs, comprising about one-third of the CPI weighting, increased 0.4% monthly and 8.1% from a year ago. The monthly gain decreased from previous months’ increases but still indicated that a critical inflation driver is rising.

With housing costs projected to decline, the Fed focuses on “super core” inflation, excluding food, energy and shelter. That measure surged 0.4% for April and increased 3.7% from a year ago. The monthly gain was slightly higher than 0.3% in March, while the annual speed was unchanged.

Similarly, the 4.4% price increase for used cars and trucks reverses the latest declines. Food prices were flat while the energy index rose 0.6%, improved by a 3% gain in gasoline.