WASHINGTON–Inflation continues to cool, but it still remains far above the target rate the Federal Reserve has set, according to new Consumer Price Index (CPI) data released by the Labor Department.
According to the Labor Department, after removing volatile food and energy costs, prices rose 5.5% in April from a year earlier, a slightly slower increase than in March. Inflation peaked at 9% in 2022.
Consumer prices rose a seasonally adjusted 0.4% in April from the prior month, versus a 0.1% gain in March, the Labor Department said. The data was released a week after The Fed raised its benchmark federal-funds rate by 25 basis points to a range between 5% and 5.25%, a 16-year high.
It was the 10th consecutive rate increase by the Fed, which has been unable to tame the rate of inflation.
CUNA: 'Significant Contribution'
"The price of used cars and trucks, which had been declining for several months, unexpectedly increased by 4.4% in April, making a significant contribution to monthly inflation," said CUNA Senior Economist Dawit Kebede."In contrast, the price of new cars decreased for the first time in over six months by 0.2%. Although still large, the contribution of housing to monthly inflation continues to decline, with shelter prices increasing by 0.4%, down from a peak of 0.8% a couple of months ago.
“To measure the underlying inflation that is predictive of future prices, the Federal Reserve tracks the trend in ‘super core’ inflation, which excludes food, energy, shelter, and used car prices," Kebede continued. "This measure excludes the usual volatile elements, lagged housing indicator, and vehicle prices impacted by production challenges. According to this measure, the April CPI report shows that inflation is easing, as the three items except food are the major contributors to the monthly increase. This data supports the decision by the Federal Reserve to pause future rate hikes.”
NAFCU: 'Suboptimal Cadence'
"Inflation is continuing on a welcome downtrend, but at a suboptimal cadence. Goods inflation had been decelerating, but April’s print showed a reversal as gas and used vehicle prices spiked," said NAFCU Economist Noah Yosif. "Reports suggest that wholesale prices for used cars have declined more recently, which should appear in the May or June CPI reports. Meanwhile, core services inflation moderated only slightly in April and remains well above levels needed to return to the Federal Reserve’s target. Overall, the headline figure for inflation was strong, but the details of this report are not substantial enough to suggest additional rate hikes remain on the horizon at this time."
Core Prices Elevated
One issue remains so-called core prices, which are still elevated due to persistently strong shelter costs. Housing price changes, noted the Wall Street Journal, can take time to show up in inflation data due to the lag in mortgage and rental contracts.
“Consumers may be getting more choosy, but they’re still willing to shell out for particular items and services,” Sarah House, senior economist at Wells Fargo, told the Journal. House noted there remains strong demand for travel.
The report further noted that more recently, one factor supporting inflation is sustained demand for workers among service providers. That is driving wage growth, which in turn causes some companies to raise prices. Another is that companies have been able to raise prices, and boost profits, without prompting a backlash, the report added.
Wages Up
The Labor Department data also show average hourly wages rose 4.4% in April from a year earlier, slightly faster than the prior month, while hiring remained strong in April and the unemployment rate fell to 3.4%, matching the lowest level since 1969.