- Key takeaway: Inflation in April continued to accelerate among all categories tracked, despite slight dips in the overall energy index.
- Supporting data: The Consumer Price Index, a monthly indicator of consumer inflation, rose by 0.6% in April and 3.8% year over year.
- What's at stake: Federal Reserve officials are likely watching the latest inflation figures closely as they assess whether the energy shock stemming from the Iran war will meaningfully accelerate broader price pressures.
WASHINGTON — The Bureau of Labor Statistics reported that consumer prices continued to rise in April, with the Consumer Price Index increasing 0.6% for the month and 3.8% from a year earlier, driven largely by a steep increase in energy prices.
Gasoline prices rose 5.4% in April after surging 21.1% the previous month. As a result, the overall energy index slowed from 10.9% to 3.8%. The BLS said the energy index accounted for more than 40% of the overall increase.
Fuel oil prices, after jumping
Food prices, which had stabilized somewhat since the beginning of the year, also increased. Grocery costs rose 0.7%, led by higher prices for beef and produce. Core inflation, which excludes food and energy, rose 0.4% on the month and 2.8% annually. On an annual basis, food prices rose 3.2%, with grocery prices up 2.9% and food-away-from-home prices easing slightly to 3.6%.
Combined with recent numbers on the labor market, Tuesday's numbers show an economy feeling the effects of the conflict in the Middle East and a job market with underlying signs of weakness. The economy added 115,000 jobs in April, though the unemployment rate stayed level at 4.3% according to BLS
Job gains primarily came from the health care, transportation and warehousing and retail sectors, while the BLS said the federal workforce continued to shed jobs. The numbers represent a resilient topline figure, though underlying data showed continued signs of cooling in the labor market, including a rise in newly unemployed workers and an increase in people working part time out of necessity.
Wage growth remained modest and some indicators suggested underlying softness in the labor market. The number of people working part time out of necessity rose by 445,000 to 4.9 million Americans. The number of newly unemployed workers, defined as people who were jobless for less than five weeks, increased sharply by 358,000 people to reach a total of 2.5 million Americans. The rate of labor force participation was effectively unchanged at 61.8%.
After cutting interest rates at three consecutive meetings to close out 2025, the Federal Reserve's Federal Open Market Committee has kept its federal funds rate target range steady at 3.5% to 3.75% since January.
Some central bank officials have
Federal Reserve Gov. Christopher Waller said in mid-April that the appropriate path for monetary policy will depend on whether the Strait of Hormuz remains open.
In an appearance, Waller said that if the strait — one of the world's most critical shipping chokepoints, through which 20% of global oil passes — reopens fully soon, the inflationary effects of higher energy prices are likely to be temporary. However, he warned that a
"If the Strait of Hormuz opens and trade flows return somewhat to normal, then I can look through the effect of recent higher energy prices on inflation [and] my focus will be on how the labor market evolves," Waller said. "If [the Strait is constrained], I'll have to balance the risks to the two sides of the Fed's dual mandate to determine the appropriate path of policy, and that may mean maintaining the policy rate at the current target range."
Meanwhile, Gov. Stephen Miran, who has advocated for rate cuts since being confirmed to the Fed in September, moderated
"What's happened in the last couple of months before the war broke out is that even though headline inflation was going sideways, the underlying composition got a little bit less favorable," he said. "In March, I wrote down that I thought four cuts was perfect for this year, but if I were writing down a dot today, I might have three."
At its May meeting, the
"Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook," the FOMC said in its press release. "The committee is attentive to the risks to both sides of its dual mandate."
