The annual rate of inflation dipped under 5% in April, the 10th-straight month of a year-over-year decline and the smallest increase in two years.
According to the latest report on the Consumer Price Index, released Wednesday by the U.S. Bureau of Labor Statistics, the CPI all-items index rose 0.4% month over month in April, up from 0.1% in March.
However, over the past 12 months the all-items index increased 4.9% before seasonal adjustment, down from 5% year over year in March. The results matched analysts expectations.
The 4.9% increase was the smallest since the 12-month period ending April 2021, and demonstrates significant progress from last summer, when the CPI hit an annual rate of 9.1%.
The index for shelter was once again the largest contributor to the monthly all-items increase, rising 8.1%,followed by increases in the index for used cars and trucks and the index for gasoline.
The increase in the gasoline index more than offset declines in other energy component indexes, and the energy index rose 0.6% in April. The food index was unchanged in April, as it was in March. The index for food at home fell 0.2% over the month while the index for food away from home rose 0.4%.
The index for all items less food and energy rose 0.4% in April, as it did in March. Indexes that increased in April included shelter, used cars and trucks, motor vehicle insurance, recreation, household furnishings and operations, and personal care. The index for airline fares and the index for new vehicles were among those that decreased over the month.
Over the past 12 months, the all-items less food and energy index rose 5.5%. The energy index decreased 5.1% for the 12 months ended in April, while the food index increased 7.7% over the last year.
The report comes a week after the Federal Reserve announced a 0.25% increase in its benchmark federal funds rate, the 10th increase in 14 months, as it works to bring the annual inflation rate down to its goal of 2%. The latest rate hike increased the range for the federal funds rate to between 5% and 5.25%.
While announcing the latest rate hike, the Fed also signaled that a pause in additional rate hikes could be on the table at future meetings. Its statement following the meeting did not include the phrase “some additional policy firming may be appropriate,” which had been included in the statement after its previous meeting in March.
“In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the Fed said.
While energy costs have fallen and the housing market has cooled off, there are still signs of strength in the economy — led by the job market. Last week, the Labor Department reported the economy added 253,000 jobs in April, while the unemployment rate slipped to 3.4%, the lowest rate since May 1969.
The Federal Open Market Committee’s next meeting is scheduled for June 13-14.
