Economists widely expect Wednesday’s report on consumer prices for April to show the first slowdown in the inflation rate in months. The Consumer Price Index (CPI) likely increased 0.2% in April, the least for any month since November 2020 and a significant drop from the 1.2% increase in March, the median forecast shows. That would translate to an 8.1% increase from April 2021, a small deceleration from March’s 8.5% rate, the highest in more than four decades. The slight improvement would be a glimmer of hope for households coping with seemingly relentless increases in prices for food, gas, housing and many other items. It might also help to calm fears about the economic fallout from the soaring inflation. The pandemic-triggered spike in prices has fueled fears of a recession, triggering a correction in benchmark stock indexes and doubling 10-year Treasury yields this year. “Probably the single biggest factor that could help break the fever in markets would be a calming of inflation,” Douglas Porter, chief economist at BMO Capital Markets, wrote in a commentary Friday. The CPI report “thus looms extraordinarily large.” One of the biggest reasons for the predicted slowdown is gas prices (along with an improvement in used car prices). A sudden spike in gas prices when Russia invaded Ukraine was one of the main reasons inflation was so high in March, but they fell back down a bit in April. Still, the national average for a gallon of gas hit a new record high Tuesday, which is one reason not to get overly encouraged by a deceleration in April inflation, economists said. The improvement isn’t likely to deter the Federal Reserve’s campaign to fight inflation, they said, meaning increases in the central bank’s benchmark interest rate—which in turn raise borrowing costs throughout the U.S.—pose the same risks to the economy. Indeed, ongoing shortages and bottlenecks in the supply chain, along with the war in Ukraine, will mean an inflation rate anyone is comfortable with—the 2% range is relatively typical under normal circumstances—is fairly far off. “Inflation may be peaking, but 2% is a long way away,” James Knightley, chief international economist at ING, wrote in a commentary. And that means inflation will continue to challenge household budgets. A recent Gallup poll showed 40% of U.S. adults were either moderately or very worried about their ability to pay their monthly bills (up from 32% in April 2021), while 52% were concerned about maintaining their standard of living, up from 45% the year before. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
