CPI report live updates: Inflation dips to 4.9%; core consumer price gains stay elevated

Inflation slowed for a tenth straight month in April as a continued moderation in grocery costs offset rising gasoline prices.

An underlying inflation measure that captures longer-lasting trends remained elevated.

Consumer prices increased 4.9% from a year earlier, down from 5% in March and a 40-year high of 9.1% last June, according to the Labor Department’s consumer price index. That's the smallest yearly increase since April 2021.

On a monthly basis, prices rose 0.4% following a 0.1% increase in March.

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What is the difference between core CPI and CPI?

Core prices, which exclude volatile food and energy items and capture longer-lasting trends, increased 0.4% from March following a similar rise the previous month. That lowered the annual increase from 5.6% to 5.5%.

The report reveals that the nation’s road back to normal inflation levels will be bumpy. For shoppers, the report was mixed. Although goods inflation has been easing as COVID-related supply chain bottlenecks wind down, some items rose last month. Apparel prices increased and used car prices jumped after nine straight declines. Rent, a big culprit inflation's surge over the past year, also climbed again but the gains have been slowing.

At the same time, grocery prices, airfares and hotel rates all declined, possibly providing some relief for the summer travel season.

"It's sticky and bumpy, but make no mistake, inflation is cooling," Gregory Daco, chief economist of EY-Parthenon wrote in a note to clients.

Barclays expects yearly inflation overall to fall to 2.5% by the end of the year, modestly above the Federal Reserve's 2% target, while core inflation falls to 3.4%.

Will the Fed continue to raise rates?

Although inflation has edged down just gradually, the Fed last week signaled it now will likely pause its aggressive campaign that has hiked a key interest rate by 5 points over the past 14 months. Fed officials have said the collapse of Silicon Valley Bank and two other banks will probably toughen lending standards and dampen the economy and inflation, leaving less work for the central bank to do.

Economist Andrew Hunter of Capital Economics says the CPI report keeps the Fed on track to halt its rate hikes but persistently high inflation could prevent Fed officials from cutting rates for a longer period,

What is the future of gas prices?

In April, gas prices increased 3% but are down 12.2% from a year ago. In recent weeks, pump prices have fallen again. Nationally, regular unleaded gasoline averaged $3.53 a gallon Tuesday, down from $3.60 a month ago.

Are grocery prices going to go down?

Grocery prices edged down 0.2%, the second straight monthly drop, and the yearly rise eased to 7.1% from 8.4%. The cost of commodities such as wheat and corn has fallen in recent months because of easing global demand.

In April, the price of eggs dropped by 1.5%, the third straight monthly decline, after a string of sharp bird flu-related increases but costs are still up 21.4% over the past year. Pork prices fell 1.2%; fish and seafood costs dipped 0.7%; and bread was down 0.3%.

But some costs continued to climb. Chicken prices increased 0.5% and uncooked ground beef, 0.6%.

As Americans have returned to dining out more frequently following the pandemic, restaurant prices increased by 0.4% and are up 8.6% annually.

10-year treasury yield

The 10-year yield was up 3.45% in mid-morning trading after the CPI report showed inflation slowing.

Is rent causing inflation?

Rent again was the chief driver of inflation but the increase is moderating. Rent picked up 0.6%, up from 0.5% in March but down from a string of stronger gains. Annually, the increase was unchanged 8.8%. Economists expect rents to fall, based on new leases, but that shift has been slow to filter through to existing leases.

Used car prices leaped 4.4% after as a flurry of wholesale cost increases finally showed up in retail prices but they’re still down 6.6% yearly. Prices had been tumbling after a pandemic-related run-up that pushed up costs by about a third.

But the cost of some services declined. Airfares fell 2.6%; hotel rates, 3%; and medical care services, 0.1%. Those declines helped slow the rise in service prices excluding housing to just  0.1%, the smallest since July 2022, Morgan Stanley says. The Fed has been  focused on tamping down inflation in that category, which is largely driven by wage growth, according to Fed Chair Jerome Powell.

Core Consumer Price Index

The core consumer price index is a measure of how consumer prices shift, not counting the costs of energy and food which are typically the most volatile components of the broader consumer price index. Economists expect the core consumer price index for April to show prices rose 0.3% over March, and 5.4%, year over year.

When did the Fed start raising interest rates?

The Fed raised its key short term interest rate a quarter of a percentage point last week - its tenth rate hike in a row. But it signaled that it may pause further boosts as it waits to see if its string of rate increases, and the tighter lending standards imposed after the failure of Silicon Valley Bank, do their part to tame inflation.

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Mortgage rates

Though a lack of homes for sale and a still robust jobs market is keeping home prices high, housing prices dipped slightly year-over-year in February and March.

Rates may decline further before the end of the year if consumer prices continue to slip, convincing the Federal Reserve to pull back on interest rate hikes and making the marketplace more enticing to home buyers and sellers.

“Mortgage rates are likely to descend lower later in the year as the consumer price inflation calms down and changes the thinking of the Fed from tightening to possibly loosening the monetary policy,” says National Association of Realtors’ chief economist Lawrence Yun.

Mortgage rates have more than doubled since the Federal Reserve began hiking interest rates over a year ago to dampen inflation. But the latest Fed's rate hike of a quarter percentage point should not impact mortgage rates because the boost was expected, says Taylor Marr, Redfin Deputy Chief Economist.

Home sales have fallen from a seasonally adjusted yearly rate of 6.5 million in January 2022 to 4.44 million in March 2023.

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Fed inflation report

The Personal Consumption Expenditure price index, the Federal Reserve’s preferred measure of inflation, comes out on May 26.

The next consumer price index report is scheduled to be released on June 13.

What is a good inflation rate?

The Federal Reserve’s target is an inflation rate of 2%. It has said that the 2% goal "is most consistent with the Federal Reserve’s mandate for maximum employment and price stability."

Inflation winners and losers

The ten consecutive rate hikes by the Federal Reserve have made it more expensive to borrow, whether you’re buying an appliance with a credit card or getting a car loan.

The annual percentage rate on a new credit card has jumped from slightly above 16% to almost 24%. Meanwhile, in the past year, Freddie Mac's 30-year mortgage rates have increased from 3.6% to 6.4%. That means if you made a $90,000 down payment and obtained a $450,000 mortgage, your monthly payment would spike by 31%, or roughly $615, according to a Bankrate calculator.

In the wake of the Fed’s latest key interest rate hike of a quarter percentage point, economists caution we have yet to see the full impact since rate hikes can take a year to ripple through the economy.

Dow futures

Stock futures were mixed in morning trading Wednesday after the 8:30 inflation report showed inflation rose less than expected in April. Dow futures were down 0.54%; S&P 500 futures dipped 0.07% and Nasdaq futures climbed 0.44%.

Inflation rate

In March, the inflation rate was 5% on an annual basis. The pace of price increases slowed for the ninth month in a row as prices at the pump and the grocery store declined.

What is the difference between core consumer price and overall consumer price index?

While the Consumer Price Index measures how average prices shift over time for various goods and services, the core consumer price leaves out the costs of energy and food which are particularly volatile.

CPI meaning

The Consumer Price Index (CPI) is a snapshot of how prices shift on average over time for a variety of products and services.

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This article originally appeared on USA TODAY: CPI report live: Inflation eases to 4.9%; core inflation falls to 5.5%