Inflation is expected to break a long streak of declines in a closely watched report on Wednesday, underlining that taming price increases remains a challenging process that could take time — and that cost increases are likely to continue burdening American families for some time.
The Consumer Price Index is expected to have climbed 5 percent in April from a year earlier, holding steady at its March level after nine straight declines. That plateau could come amid strong price increases for food, gas, used cars and car insurance. Inflation would still be down notably from a peak just above 9 percent last summer, but it would remain far higher than the 2 percent 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 are expected to climb 5.5 percent, a slight drop from 5.6 percent in the previous reading.
Although inflation has been gradually cooling, it remains too elevated for policymakers to be comfortable. Much of the slowing in price increases has come as supply chain bottlenecks have cleared up, goods shortages have eased and gas prices have moderated after a surge in summer 2022 that was tied to Russia’s invasion of Ukraine. Underlying trends that could keep inflation persistently high over time remain intact, including unusually strong wage growth, which could prod companies to try to charge more for products and services.
Federal Reserve officials are likely to watch the April inflation report closely. Officials have raised interest rates over the past year at the fastest pace since the 1980s to slow lending and weigh down the economy, but now that rates are above 5 percent, policymakers have signaled that they could pause rate moves as soon as their mid-June meeting. That decision will hinge on incoming economic and financial data, they have said.
Policymakers will receive the consumer price report for May on June 13, the day before their decision, but officials typically give markets at least a hint of what they might do with rates ahead of time. That puts the attention on the April report.
There could be one silver lining from April’s numbers: Some economists expect a meaningful slowdown in services prices after stripping out food, energy and housing costs. Policymakers have been watching that trimmed-down measure for a signal of where price increases might go next.
Airfares and a measure of health insurance could be among the categories pulling that core index down, Omair Sharif, founder of Inflation Insights, wrote in a note ahead of the report.
He is calling for the “slowest pace of advance since July 2022” in the closely watched measure, he wrote.
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