The figures: A key measure of US inflation rose just 0.2% in April to mark the smallest increase in a year and a half, helped by lower petrol prices. There were additional indications that a rise in US inflation could be slowing.
The rise in the so-called personal consumer price index, or PCE, was the smallest since November 2020.
In addition, the inflation rate over the last year slowed to 6.3% in April from a 40-year high of 6.6% the previous month. It was the first descent in a year and a half.
A more limited measure of inflation that omits volatile food and energy costs, known as the core PCE, rose by a relatively modest 0.3% in April for the third month in a row. This was in line with the Wall Street forecast.
The Fed considers the PCE index, the base rate in particular, to be the most accurate measure of US inflation. It is more complete and is taken into account when consumers replace cheaper products with more expensive ones, for example, minced meat with filet mignon or frozen spinach with fresh ones.
The U.S. Bureau of Labor Statistics’ best-known consumer price index rose 8.3% in the 12 months to April.
Overview: Most Americans have never experienced such high inflation, and it has caused a great deal of distress on both Main Street and Wall Street, as well as Washington.
In an attempt to stifle inflation, the Fed is moving to rapidly raise a key short-term interest rate that held close to zero percent for most of the pandemic. The resulting rise in interest rates on car loans, mortgages and business loans is likely to slow the economy, although Fed officials argue that they can reduce inflation without causing a recession.
Whether rising inflation is starting to go away soon is still an open question.
The war in Ukraine has pushed up oil and other commodity prices, while recent blockades in China have exacerbated supply chain problems that had contributed greatly to higher inflation readings in decades.
Key Details: The trio of readings of 0.3% of the PCE base rate from February to April was the smallest since last summer, when rising inflation slowed briefly.
As a result, the inflation rate of the underlying PCE last year fell to 4.9% from 5.2%. The monthly decline was the second in a row. The last consecutive declines occurred at the beginning of the pandemic.
Looking to the future: “The slowdown in inflation is very welcome, although overall inflation is likely to rise again in May in May with another sharp rise in energy prices,” the chief economist said. of PNC Financial Services, Gus Faucher.
“Inflation is likely to peak year-on-year in the spring, but is still well above the Fed’s 2% target.”
Market Reaction: The Dow Jones Industrial Average DJIA, + 0.95%, and the S&P 500 SPX, + 1.63% rose in trading on Friday. Shares have risen this week after a setback in recent weeks.