Inflation slowed for a 10th straight month in April, a closely watched report showed on Wednesday, good news for American families struggling under the burden of higher costs and for policymakers in Washington as they try to fight rapid price increases.
The consumer price index rose 4.9 percent in April from a year earlier, less than the 5 percent economists had expected in a Bloomberg survey. Inflation has fallen sharply from a peak of just above 9% last summer, although it has remained much higher than the 2% annual gains that were normal before the pandemic.
After stripping out food and fuel to get a sense of the underlying trend in price increases, what economists call a core measure, consumer prices rose 5.5 percent from a year earlier, a slight drop from 5.6 percent in the previous reading.
The slowdown in price increases last month came even as gas costs rose and rental costs continued to rise rapidly. New car prices, a measure of the price of health care, and airfares all declined in April, the report showed.
Although inflation has been gradually cooling, it has remained too high for policymakers to feel comfortable. Much of the slowdown in price increases has come as supply chain bottlenecks have cleared, commodity shortages have eased, and gas prices have moderated after of an increase in the summer of 2022 linked to the invasion of Ukraine by Russia. But the underlying trends that could keep inflation consistently high over time have remained intact, including unusually strong wage growth, which could prompt companies to try to charge more for products and services.
However, policymakers also received good news along these lines in Wednesday’s report. The data showed a significant slowdown in service prices after stripping out food, energy and housing costs. That measure rose 5.2 percent annually, down sharply from 5.7 percent in the previous reading.
Policymakers have been watching this cut measure for a sign of where price increases could be headed.
Stock prices rose after the data was released, a sign that investors interpreted the data as good news for Federal Reserve policymakers.
Fed officials are likely to keep a close eye on the April inflation report. Officials have raised interest rates over the past year at the fastest pace since the 1980s to curb borrowing and weigh on the economy, but now that rates are above 5 percent, policymakers have indicated they could stop rate moves as early as mid-June. meeting That decision will depend on incoming economic and financial data, they said.
Policymakers will receive May’s consumer price report on June 13, the day before their decision, but officials usually give markets at least a hint of what they might do with rates in advance. This puts an important focus on the April report.
John C. Williams, the president of the Federal Reserve Bank of New York, told reporters in New York on Tuesday that the Fed’s next decision — whether to raise rates or pause at the June meeting — would depend on the incoming data.
He said it had been appropriate for the Fed to raise interest rates until May to try to get them into a tightening stance, and that now “we will adjust policy going forward based on what we see.”
