Lower food prices offset higher energy costs in April. (iStock)
Statistics show consumer prices rose more slowly than expected in April, but remained above last year’s levels. consumer price index (CPI) Published by the Bureau of Labor Statistics (BLS).
On an annualized basis, prices rose 3.4% in April, slowing slightly from the previous month’s 3.5% rise and in line with expectations. On a monthly basis, prices rose 0.3%, following a 0.4% rise in the previous month, below the 0.4% growth expected by economists. Core inflation, which excludes volatile food and energy prices, rose 0.3%, lower than the 0.4% rise in the previous three months.
Evacuation shelter and gasoline costs weighed heavily on consumer spending, contributing to more than 70% of the monthly index increase for all items. Flat food prices help offset the impact of rising energy costs.
Inflation in April broke a series of consecutive increases that had raised concerns about a second wave of inflation and renewed interest rate hikes. Slowing inflation and slowing job growth in April could be enough to bring forward the date the Federal Reserve will start cutting interest rates.
The central bank announced at its May meeting that it would maintain the federal funds rate range at 5.25% to 5.5%, and rates have remained unchanged since July. Fed officials say they expect to cut rates in 2024 but need more confidence that inflation is on track to reach their 2% target rate.
“The good news is that inflation appears to be slowly returning to more favorable levels due to the Fed’s aggressive actions to cool demand. However, the path to 2% will not be easy and policy planning “This appears to be further away than many would like,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
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Shelter costs contribute significantly to high inflation
Shelter costs continued to drive inflation in April. It rose 0.4% in April and 5.5% over the past year. Daniel Hale, chief economist at Realtor.com, said shelter costs continue to be a significant factor in overall costs, but April’s reading was lower than March’s 5.7%, which is expected to increase in March 2023. This is down from the peak of 8.2% in March.
“Rental asking prices in the market are slowing and are declining in some markets, but it will take time for this to be reflected in overall shelter cost trends,” Mr Hale said.
This is good news for the housing market. That’s because the Fed could soon reverse its stance on raising long-term rates and start lowering rates, which could help stabilize mortgage costs.
“Mortgage rates have stopped rising as well, but they remain above 7% after five weeks of increases,” Hale said. “For mortgage rates to fall below 7%, inflation needs to get back on track towards 2%. Today’s data is a small step in the right direction and brings some stability to interest rates at current levels. Yes, and more likely.” That would lead to further declines. ”
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Consumers who make the most of their credit cards
High inflation and rising costs have led some consumers to rely more on debt products such as credit cards to make ends meet. According to one research agency, the number of borrowers who have maxed out their credit scores and are behind on their payments is increasing. recent reports By the Federal Reserve Bank of New York.
Some of the most important users of credit cards included Gen Z and Millennial borrowers, as well as low-income borrowers. Borrowers with utilization rates above 90% were more likely to be behind in repayments in the past year.
“In the first quarter of 2024, rates of credit card and auto loan transitions into serious delinquency continued to rise across all age groups,” said Joel Scully, director of regional economics in the Household and Public Policy Research Department at the New York Fed. Stated. statement. “We found that an increasing number of borrowers are falling behind on their credit card payments, worsening financial hardship for some households.”
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