The Consumer Price Index (CPI) posted a modest 0.3% increase in April 2024, following a slightly higher 0.4% increase in March, beating expectations that also anticipated a 0.4% increase. With this, the CPI climbed 3.4% annually from 3.5% in the previous month. On the other hand, core inflation excluding food and energy (Core CPI) continued its steady increase of 0.3% in April, similar to the previous three months and in line with expectations. However, in its annual variation, it observed a deceleration to 3.6% from 3.8% and resulted in the lowest since April 2021.
Below, we share the performance of the key components:
- Energy: The energy index rose 1.1% in the month, maintaining the same increase as in March. This increase was significantly influenced by a 2.8% increase in gasoline prices. Annually, the energy index increased 2.6% with a 1.2% increase in gasoline prices.
- Food: Food indexes showed little change overall. The food at home index decreased slightly by 0.2%, while food away from home increased by 0.3%. With these data, the overall food index rose 2.2% over the past twelve months, with a significant 4.1% increase in food consumed away from home.
- Housing Costs: These continue to be an important driver of the index, after rising 0.4% in the month. Over the last twelve months, the lodging index increased 5.5%, indicating that housing costs maintain persistent upward pressure. Importantly, this category contributed substantially to the 3.6% annual increase in the core index.
Finally, the transportation and medical care categories recorded notable increases. In this sense, transportation services increased by 11.2% in the last year (0.9% in the month), while medical services saw a more moderate increase of 2.7% (0.4% in the month).
In this context, it can be concluded that the April report, to some extent, offers positive news that could provide some relief to the FED. However, the reality is that sustained inflationary pressures continue to be seen in terms of energy and housing costs. Therefore, markets may continue to navigate a higher interest rate environment for some time to come, at least until it becomes clearer that inflation is moving more strongly toward the FED’s 2% long-term target. Given this data, as well as the latest employment figures, the consensus is for the FED to leave the reference rate unchanged at 5.25 – 5.50% for the June 12 meeting.
Change (%) in the last twelve months in CPI and Core CPI
Source: U.S. Bureau of Labor Statistics
Monthly change (%) of CPI
Source: U.S. Bureau of Labor Statistics