Inflation eased in April for the first time since January, indicated the Consumer Price Index (CPI), released by the U.S. Bureau of Labor Statistics Wednesday.
The CPI increased 0.3% month-over-month in April after increasing 0.4% in March. Year over year, CPI rose 3.4% in line with expectations. Core CPI, all items less food and energy, rose 0.3% month over month and 3.6% year over year. The indices for shelter and gasoline both rose in April, which combined, contributed over 70% of the monthly increase in the index for all items. The energy index rose 1.1% over the same time frame, while the food index remained unchanged.
“There are two ‘inflation in-laws’ that just won’t leave – higher than long-run trend services-less-shelter inflation, which has been increasing in recent months, and shelter inflation that remains persistently above the historical trend,” First American Chief Economist Mark Fleming commented on the report. “In fact, the index for shelter inflation increased 5.5% year over year in April, barely continuing its slow deceleration, and was a major contributor – given its very high weight in the ‘basket’ – to overall inflation.”
As Fleming noted, economic analysts are particularly interested in the CPI’s shelter component, as it tends to be the Fed’s preferred measure of inflation. Recent trends in market rents increasing or remaining the same are a future headwind to overall shelter inflation normalizing.
“This is what happens when you don’t build enough of a product in high demand,” Fleming pointed out. “Shelter inflation headwinds picking up strength.”
Wednesday’s CPI release follows the Federal Reserve Open Market Committee’s May 1 decision to leave its Federal Funds rate unchanged for the sixth consecutive time. It’s the Fed’s dual mandate to keep prices stable and maximize employment in the U.S. Officials are looking for signs inflation will reach their 2% target before cutting interest rates.
There’s been no indication as to when a rate cut might happen, if at all in 2024.
