Core inflation at its highest in nearly 3 years, Fed could consider rate hikes
Core inflation in the U.S. hit 3.3% in April, the highest in nearly three years, while the Federal Reserve may delay rate cuts or even consider hikes due to persistent price increases in groceries, clothing, and services. Gas prices averaged $4.50 a gallon, and AI-driven demand for computer equipment further strained inflation, raising concerns among policymakers.
The U.S. Commerce Department reported Thursday that core inflation—excluding volatile food and energy costs—rose to 3.3% in April, the highest since October 2023. This marks a sharp increase from 3.2% in March and exceeds the Federal Reserve’s 2% target, signaling potential delays in interest rate cuts. The Fed may even consider raising rates, as officials cite rising prices for groceries, clothing, electricity, and services as persistent threats. Monthly core inflation slowed slightly to 0.2% from March, down from 0.3%, but broader inflation remained elevated at 3.8% year-over-year, up from 3.5% in March. Gasoline prices, though slightly lower at $4.43 per gallon, had averaged $4.50 for weeks, while AI-driven demand for computer equipment and software contributed to further cost pressures. Personal income remained flat in April, with farm incomes declining after government aid ended, while inflation-adjusted spending fell 0.1%. The economy grew modestly at a 1.6% annual pace in the first quarter, down from an initial estimate of 2%, reflecting challenges from a federal government shutdown and the Iran war. Federal Reserve officials have increasingly signaled concerns that inflation may peak due to tariffs, supply shocks, and rising service costs, including dental, car repair, and veterinary expenses. The report underscores growing financial strain on American households as prices continue to outpace wage growth.
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