US inflation rate slows but remains close to 40-year high

Price rises slowed in the US in April but the annual inflation rate remained close to a 40-year high, leaving many Americans struggling to afford necessities including food, shelter and fuel.

The latest consumer price index (CPI) figures – which measure a broad range of goods and services – showed prices rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021.

But it is still too early to say whether inflation has peaked. At 8.3% the annual rate of inflation in April was down from 8.5% in March but remains at a level unseen since the 1980s. Over the year the CPI’s food index increased 9.4%, the largest 12-month increase since April 1981. The so-called core-price index – which excludes the volatile categories of food and energy – increased 0.6% on the month, up from March’s 0.3% gain.

The figures come as the Federal Reserve is moving to sharply increase interest rates in an attempt to bring prices back under control. The pace of rate rises, and fears that they may trigger a recession, have spooked investors and sent stock markets reeling.

Soaring demand and a lack of supply thanks to the pandemic have led to price rises across a broad swath of goods and services. Air fares are up 40% over the last three months. A booming house market has made housing unaffordable for many Americans, especially people of color, and 49% of people recently told Pew Research that affordable housing is a large problem in their community.

Randall Kroszner, an economics professor at the University of Chicago and former Fed governor, said the sharp rise in core inflation would worry the Fed. “That is where you look for evidence that inflation is becoming entrenched,” he said.

Kroszner said global issues including the war in Ukraine and China’s Covid woes had combined with rising rates to deliver a “one-two punch” to the US economy. He believes the chances of the US entering a recession have risen and that the housing and jobs markets may be the next to suffer.

“I’m generally an optimist but this is challenging,” he said.

The rising cost of living has become a leading political issue as the US prepares for November’s midterm elections. Rising prices have battered Joe Biden’s approval ratings. This week an Investors Business Daily/TIPP poll found that Biden’s approval had fallen to 39%, approaching his previous record low of 38% set in February, and confidence in the US economy was close to an eight-year low.

On Tuesday, Biden said his administration was doing all it could to tackle inflation. “I want every American to know that I’m taking inflation very seriously,” he said in remarks from the White House. “It’s my top domestic priority.

The Biden administration has made attempts to bring down prices. In March the White House announced plans to release up to 1m barrels of oil a day from the strategic reserve, in an attempt to dampen high gasoline prices exacerbated by the war in Ukraine. But gas prices remain elevated at a national average of $4.37 a gallon compared with $2.96 a year ago, according to AAA.

Republicans have blamed Biden’s stimulus programs for rising prices, a claim he disputes. ​​ The president said his policies had “helped not hurt” the nation’s economic outlook.

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