- The headline CPI index rose 0.3% month-over-month in April, lifting the year-over-year rate to a five-month high of 2.0%
- Gasoline prices rose for a third consecutive month, pushing energy inflation back into positive territory for the first time since November
- Core inflation was up just 0.1% month-over-month, but the year-over-year rate still ticked higher to 2.1%
- Rising shelter costs offset a third consecutive monthly decline in core commodity prices (particularly apparel and used vehicles)
At the last FOMC meeting, Chair Powell fielded plenty of questions on the recent decline in core PCE inflation. Core CPI has seen a similar slowdown since mid-2018, though it drew a bit less attention (it’s still running at or above 2%, and it’s not the Fed’s preferred measure). As Powell pointed out, slower price growth in some individual components is weighing on inflation. Apparel prices, for instance, are falling at their fastest year-over-year rate since 2003. US dollar appreciation to the tune of 6% is likely a factor there. As with PCE, measures of CPI that filter out such idiosyncratic price movements point to a steadier inflation trend than the standard headline and core measures suggest. That supports Powell’s view that the recent slowdown in inflation should ultimately prove transitory. But for the time being, inflation readings give the Fed little reason to deviate from their “patient” mantra.
