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12-05-2022
WASHINGTON: US consumer price growth slowed sharply in April as gasoline prices eased off record highs, suggesting that inflation has probably peaked, though it is likely to stay hot for a while and keep the Federal Reserve’s foot on the brakes to cool demand.
That aspect was reinforced by the report from the Labor Department on Wednesday, which also showed underlying monthly inflation pressures building up again after a brief lull in March as airline tickets prices notched their biggest increase on record. Rents rose by the most since 2006.
“The country’s struggle with high inflation isn’t over yet, but the markets can still breathe a sigh of relief that it is not getting any worse,” said Christopher Rupkey, Chief Economist at FWDBONDS in New York. “The Fed can stay on plan with 50 bps rate hikes at the next two meetings in June and July and there is no reason to move more expeditiously to fight inflation.”
The consumer price index increased 0.3% last month, the smallest gain since last August as gasoline prices fell 6.1% after soaring 18.3% in March. That stood in sharp contrast to the 1.2% month-to-month surge in the CPI in March, which was the largest advance since September 2005. The drop in gasoline blunted a 0.9% increase in food prices but the deceleration in the monthly CPI is probably temporary. Gasoline prices are rising again and were about $4.161 per gallon early this week after dipping below $4 in April, according to the Energy Information Administration.
Russia’s unprovoked war against Ukraine is the main catalyst for the surge in gasoline prices. The war has also driven up global goods prices.
Inflation was already a problem before Moscow’s Feb. 24 invasion of Ukraine because of stretched global supply chains as economies emerged from the COVID-19 pandemic after governments around the world injected large amounts of money in pandemic relief and central banks slashed interest rates.
President Joe Biden on Tuesday acknowledged the pain that high inflation was inflicting on American families and said bringing prices down “is my top domestic priority.”
The Fed last week raised its policy interest rate by half a percentage point, the biggest hike in 22 years, and said it would begin trimming its bond holdings next month. The US central bank started raising rates in March.
US stocks were higher. The dollar fell against a basket of currencies. US Treasury yields rose. (Int’l News Desk)
