Federal Reserve: US inflation shows signs of moderating, giving Federal Reserve room to pause – Times of India

Washington: US inflation showed signs of softening in April, which federal Reserve Scope to stop interest rate hike soon
consumer price Index rose 4.9% from a year earlier, the first sub-5% reading in two years, a Bureau of Labor Statistics The report came on Wednesday. The so-called core consumer price index, excluding food and energy, also cooled slightly.
A narrower price measure often cited by Fed officials – tracking services that have fizzled as the pandemic worsens – saw airfares and hotel costs drop through mid-2022, registering the smallest monthly increases since even more A more pronounced slowdown appeared.
The report suggests that inflation is coming down as a year’s worth of interest rate increases and recent credit stress work their way through the economy. However, overall prices are still rising at a strong pace and the job market remains strong.
The Fed will need to see more than a month’s worth of data to be convinced that there is sustained downward pressure on prices, especially after officials indicated last week that they may be hiking for now. Is.
That said, Wednesday’s report will be one of many factors in policymakers’ decision next month. They’ll also receive the CPI for May, as well as reports on the labor market and their favorite inflation measure, the Personal Consumption Expenditure Index. Additionally, the authorities are still monitoring the ongoing banking stress and to what extent it will further tighten credit conditions.
Several key elements of US inflation eased in April, as prices for airfares, hotel stays and new cars declined. The biggest decline was recorded in equipment.
Shelter costs, which are the largest services component and make up about one-third of the overall CPI index, rose 0.4% last month, the lowest in a year. Advanced rental solutions.
Because of the way housing metrics are calculated, there is a significant lag between real-time price changes and government data. Other metrics suggest these gauges will rebound soon, but economists are divided on the exact timing.
Separating energy and housing, services prices were up 0.1% in April and 5.1% from a year earlier, according to Bloomberg calculations, both the weakest since July. Policymakers have stressed the importance of looking at such a metric when assessing a nation’s inflation trajectory, although they calculate it based on a different index.
Goods deflation that was pulling down overall price pressures last year is losing steam. Excluding food and energy, prices for goods rose 0.6% in April, the most since June. Used-car prices – a key driver of slow price growth in recent months – rebounded to rise the most in nearly two years.
Energy prices climbed 0.6% for the month, driven by higher pump prices. While grocery costs fell for a second month, the cost of eating out continued to rise. Baby food and formula prices rose by the most on record.
While Fed officials agree that wage gains and price increases are related, they are divided over which drives the other. A separate report on Wednesday showed real average hourly earnings climbed 0.1% in April, and were down 0.5% from a year earlier.
What does Bloomberg’s economics say…
“While the April CPI report isn’t exactly reassuring, it won’t shock Fed officials to signal another rate hike in June, given their expectation that the full deflationary effects from tighter credit conditions have yet to appear.” Used to be. However, slow progress in reducing core inflation highlights how unlikely the Fed is to cut rates this year.