Upward pressure on prices eased a bit in April, the Bureau of Labor Statistics announced Wednesday, providing a ray of hope that the U.S. has put the worst of inflation behind it.
The Consumer Price Index rose by 8.3% in April relative to a year earlier, down from the 8.5% recorded in March. But analysts expected to see a lower number, fueling doubts about whether the economy has truly turned a corner and worries that we’ll still be dealing with inflation for many months to come.
One clear bit of good news is a drop in the month-over-month inflation rate, with prices rising 0.3% in April compared to March, a big decrease from the 1.2% rate recorded last month. Cheaper gasoline played a big role, with prices falling 6.1% on a monthly basis.
But other inflation components were less reassuring. Food prices rose by 0.9%, or 9.4% on a 12-month basis, with dairy increasing by 2.5% in April, the largest increase in 15 years. And inflation in core prices, which leaves out volatile fuel and food components, was higher than expected, doubling to 0.6% on a monthly basis.
Still a long way to go: While the report was mixed and could support both optimistic and pessimistic arguments about where the economy is headed, it’s fairly clear that the fight against inflation is far from over and that the Federal Reserve has a difficult road ahead, especially as it relates to the supply side of the economy, where the pandemic and war continue to create serious problems.
“Unfortunately, this data reinforces the idea that the Fed can do little to nothing around the supply side issues and idiosyncratic risks to the inflation outlook,” Joseph Brusuelas, chief economist at the consulting firm RSM, said in a note. “That leaves the Fed little choice but to drop the hammer of rising interest rates on American households that are still adjusting to a series of shocks over the past two years.”