Key indicators showed U.S. inflation slowed in April but remained near a 40-year high.
On Thursday, May 27, data from the U.S. Department of Commerce showed that the U.S. PCE price index in April increased by 6.3% year-on-year, compared with the expected value of 6.2% and the previous value of 6.6%.
The most important indicator for Fed policymakers, the core PCE price index excluding food and energy prices, rose 4.9% year-on-year, compared with an expected 4.9% and the previous value of 5.2%.
While the PCE price index slowed in April from its previous reading, it was still the fastest rate of inflation since 1982.
The slowdown in inflation in April was largely driven by lower gasoline and other energy prices. Natural gas prices surged in February and March after the Russian-Ukrainian crisis, but they have risen again in recent weeks, which could push inflation gauges back in May. Food prices have also risen rapidly in recent months.
According to media reports, Omair Sharif, founder of research firm Inflation Insights, said:
I suspect that the Fed may be ignoring this slowdown.
He noted that the core PCE price index also slowed last fall, but picked up again at the end of the year, catching the Fed by surprise.
Many forecasters believe headline inflation peaked in March and will begin to cool in April, but the recent rebound in natural gas prices could complicate the situation. And, even as inflation continues to fall, prices are rising well above the Fed’s 2% target.
“Inflation has been high and rising over the past year, and we’re now in a ‘both high and low’ phase,” said Tim Quinlan, senior economist at Wells Fargo.
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