US consumer price inflation slowed sharply in April as petrol prices fell to record highs, suggesting that inflation may have peaked, although it may remain hot for some time and the Federal Reserve is likely to hold on to foot breaks to cool demand.
The consumer price index rose 0.3% last month, the smallest gain since last August, the Labor Department said on Wednesday. This was in stark contrast to the 1.2% month-on-month rise in CPI in March, the biggest increase since September 2005.
But the downturn in the CPI is probably temporary. According to the Energy Information Administration, the price of gasoline, which is responsible for reversing most of the monthly inflation, is rising again and was about $ 4,161 per gallon earlier this week after falling below $ 4 in April.
Russia’s provocative war against Ukraine is a major catalyst for rising petrol prices. The war has also raised good prices worldwide.
Before Moscow’s February 24 invasion of Ukraine, inflation was already a problem because of the expansion of the global supply chain as economies emerged from the COVID-19 epidemic after governments around the world injected large sums of money into epidemic relief and central banks cut interest rates.
President Joe Biden acknowledged Tuesday that high inflation is hitting American households and that lowering prices is “my top domestic priority.”
The Fed raised its policy interest rate by half a percentage point last week, the biggest increase in 22 years, and said it would begin cutting its bond holdings next month. The US Federal Reserve began raising interest rates in March.
In the 12 months since April, the CPI has risen 8.3%. This is the first decline in annual CPI since last August, marking the seventh month of more than 6% growth. The CPI rose 8.5% in March, the biggest annual gain since December 1981.
Economists surveyed by Reuters forecast consumer prices to rise 0.2% in April and 8.1% year on year.
Although monthly inflation will rise, annual readings are likely to decline further as last year’s large growth has gone out of calculation, but will remain above the Fed’s 2% target until at least 2023.
China’s Zero Tolerance Covid-19 policy puts more pressure on the global supply chain, pushing up commodity prices. Prices for services such as air travel and hotel accommodation have been seen to drive up inflation in the face of strong summer demand and labor shortages.
Solid gains in fares, airline fares and new motor vehicle prices have boosted underlying inflation over the past month.
Excluding volatile food and energy components, the CPI rose 0.6% after rising 0.3% in March. The so-called core CPI has risen 6.2% in the 12 months since April. This was after a 6.5% jump in March, the biggest gain since August 1982.