Current:Home > ScamsInflation stayed high last month, compounding the challenges facing the U.S. economy -AssetBase
Inflation stayed high last month, compounding the challenges facing the U.S. economy
View
Date:2025-04-13 16:17:27
Inflation remained stubbornly high last month after more than a year of rising interest rates.
The Labor Department said Wednesday that consumer prices in April were 4.9% higher than a year ago, a slight slowdown from the 5% inflation rate in March. It was the smallest annual cost-of-living increase in two years.
It's a challenging crossroads for policymakers, caught between persistently high prices and the rising risk of recession.
Although inflation has dropped significantly from a four-decade high last June, it remains well above the Federal Reserve's target rate of 2%.
Prices rose 0.4% between March in April, with prices for housing, gasoline and used cars leading the way.
Housing inflation is expected to decline at some point, but perhaps not as quickly as some had hoped, after a sharp drop in March.
"My feeling is that there's a gradual slowdown here, but March seemed a little too good to be true," said Omair Sharif, president of the forecasting firm Inflation Insights.
The price of used cars and trucks rebounded in April, rising 4.4% from March, after falling earlier in the year. Dealers were forced to pay premium prices at auction this winter to keep cars on their lots.
"Demand picked up unexpectedly around the turn of the year and dealers got caught short," Sharif said.
Airline prices eased last month
Outside of housing and transportation, the cost of services is not rising so quickly, which could be reassuring to inflation watchdogs at the Federal Reserve.
"Once you look through some of these details, I think you actually ought to be feeling better about where things are headed on inflation over the next three to six months," Sharif said.
Airfares fell by 2.6% in April after a 4% jump in March.
"Airports are jam-packed, so it's not that people aren't traveling as much," Sharif said. "But the pressure on air fares from jet fuel costs has receded."
He also thinks airline passengers are nearing the limit of what they're willing to pay.
"There's only so much people are going to bear in how much does it cost to fly from New York to L.A. or Chicago to Miami or whatever," Shariff said.
Gasoline prices rose 3% in April, after falling 4.6% the month before. Food prices were flat during the month, with a drop in grocery prices offset by the rising cost of restaurant meals. Excluding volatile food and energy prices, so called "core inflation" was 0.4% in April and 5.5% for the year.
The Fed faces a tough job
The Federal Reserve has raised interest rates ten times in the last 14 months in an effort to tamp down demand and bring prices under control.
After the most recent rate hike a week ago, Fed policymakers hinted further increases might be unnecessary. But the central bank isn't making any promises about its future steps, given the staying power of inflation and the uncertain economic outlook.
"It's not a business-as-usual macro economy right now," New York Federal Reserve Bank president John Williams said Tuesday. "There's just a lot of churn, if you will, going on in supply and demand."
Williams told the Economic Club of New York he expects inflation to fall to about 3.5% by the end of this year. He thinks the U.S. can avoid falling into recession, but acknowledged recent turmoil in the banking system has added more economic risk.
The failures of Silicon Valley Bank and Signature Bank in March and First Republic Bank last week is making other lenders more cautious about extending credit, which could be a drag on economic growth.
"In February, I had this pretty positive view [that] the economy was going to grow much stronger," Williams said. "That's now offset by a view that we're going to see some slowing in credit," as other banks become more wary about making loans.
The mixed blessing of a strong jobs market
Despite the strains on the economy, the job market remains unusually strong. The unemployment rate is just 3.4%, matching a 54-year low. And last month employers added 253,000 jobs.
But the strength of the job market is a mixed blessing, since rising wages can also contribute to higher prices. Average hourly wage growth accelerated in April to 4.4%.
Fed chairman Jerome Powell said last week he doesn't believe wages are the principal driver of inflation, even if wages and prices tend to move together.
Sharif agrees.
"Wages are definitely pushing up inflation and you could argue that inflation is pushing up wages," he said. "But there's a lot of other elements that are probably playing a bigger role."
veryGood! (8)
Related
- Small twin
- DJ Moore is first Bears wide receiver since 1999 to win NFC Offensive Player of the Week
- Gloria Trevi reveals 2024 Mi Soundtrack World tour with epic helicopter entrance at LA event
- Watch this sweet Golden Retriever comfort their tearful owner during her time of need
- Justice Department, Louisville reach deal after probe prompted by Breonna Taylor killing
- Nashville sues over Tennessee law letting state pick six of 13 on local pro sports facility board
- A company cancels its plans to recover more Titanic artifacts. Its renowned expert died on the Titan
- Former offensive lineman Mark Schlereth scorches Jerry Jeudy, Denver for 1-4 start
- Dick Vitale announces he is cancer free: 'Santa Claus came early'
- Billy Ray Cyrus Marries Firerose in Beautiful, Joyous Ceremony
Ranking
- Opinion: Gianni Infantino, FIFA sell souls and 2034 World Cup for Saudi Arabia's billions
- Looking for last-minute solar eclipse glasses? These libraries and vendors can help
- 'Top moment': Young fan overjoyed as Keanu Reeves plays catch with him before Dogstar show
- Entrance to Baltimore Washington International Airport closed due to law enforcement investigation
- Elon Musk's skyrocketing net worth: He's the first person with over $400 billion
- Why are there multiple Amazon Prime Days in 2023? Here's what to know.
- Arkansas AG sets ballot language for proposal to drop sales tax on diapers, menstrual products
- Orioles get swept for 1st time in 2023, lose AL Division Series in 3 games to Rangers
Recommendation
Could your smelly farts help science?
AP PHOTOS: Protests by pro-Israel and pro-Palestinian demonstrators span the world as war escalates
Looking for last-minute solar eclipse glasses? These libraries and vendors can help
3 witchy books for fall that offer fright and delight
Could Bill Belichick, Robert Kraft reunite? Maybe in Pro Football Hall of Fame's 2026 class
Here's Why it's Hard to Make Money as an Amazon Seller
Americans consume a lot of red meat. Here's why you shouldn't.
Chinese carmaker Geely and Malaysia’s Proton consider EV plant in Thailand, Thai prime minister says