Inflation rose slightly in April and remained above the Federal Reserve’s target rate as the economic impact of higher tariffs is expected to impact consumer prices in the coming months.
The Bureau of Labor Statistics on Tuesday said that the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – rose 0.2% in April compared with last month, while it was up 2.3% on an annual basis. The annual inflation rate was the lowest since February 2021.
Both of those figures were slightly cooler than the estimates of economists polled by LSEG, who predicted a monthly figure of 0.3% and annual inflation of 2.4%. The rise in monthly inflation comes after an unexpected decline in March, when it fell 0.1%. Headline inflation was unchanged in April.
So-called core prices, which exclude more volatile measurements of gasoline and food to better assess price growth trends, were up 0.2% from the prior month, slightly cooler than expected, and 2.8% on an annual basis, in line with economists’ expectations. The headline figure was unchanged, while the monthly figure was up from a 0.1% increase a month ago.
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The report showed that inflationary pressures in the U.S. economy remain persistent despite progress in bringing inflation closer to the Federal Reserve’s 2% target in recent years.
High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paycheck on necessities and have less flexibility to save money.
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Food prices fell 0.1% in April from the prior month and were 2.8% higher on an annual basis. The food at home index declined 0.4% for the month and 2% from a year ago, while food away from home was up 0.4% and 3.9% from last year.
Egg prices declined 12.7% in April, as the cooling trend continued after the industry saw rapid price growth last year due to an avian flu outbreak. The index for meats, poultry and fish was unchanged in April, while the dairy index declined 0.2%, the index for cereals and bakery products was down 0.5% for the month, and the fruits and vegetables index was down 0.4% for April.
Energy prices rose 0.7% in April. Over the past 12 months, the energy index is down 3.7%, driven by declines in gasoline prices (-11.8%) despite increases in electricity prices (+3.6%) and natural gas (+15.7%).
Housing prices were up 0.3% on a monthly basis, accounting for more than half of the all items index’s monthly increase. Over the last year, the shelter index increased 4%.
Transportation costs rose 0.1% in April and are 2.5% higher than a year ago. Airline fares declined 2.8% for the month and are down 7.9% from a year ago, while motor vehicle insurance prices were up 0.6% on a monthly basis and 6.4% compared with last year.
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The cooler-than-expected inflation report for April comes after the Federal Reserve last week held off on cutting interest rates for the third consecutive meeting, as it waits for signs of inflation subsiding to its 2% target as well as potential price increases due to President Donald Trump’s tariffs.
Fed Chair Jerome Powell noted at a press conference last week that the impact of tariff policies is “highly uncertain” but if the large tariffs remain in place, they’re “likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment.”
Economists noted that the price impact of most tariffs doesn’t appear to have translated into the inflation data yet through the April reporting period.
“There isn’t a lot of evidence of tariffs boosting the CPI in April, but this shouldn’t be surprising as it takes time,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “The areas where tariffs likely boosted prices in April were in furniture/bedding, appliances, and to a lesser extent toys.” new vehicle prices were unchanged between March and April while used prices fell. We know from wholesale used-vehicle prices that this decline won’t stick.”
Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said that the “downside surprise in the CPI doesn’t mean tariffs aren’t impacting the economy, it just means they aren’t showing up in the data yet. Wait and see is still the name of the game, and until that changes, the Fed will remain on the sidelines.”
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