15 May: Inflation Down But Hopes Fade for Next Fed Meeting
US inflation rose 3.4% in the year to April, down from 3.5% in the year to March, but likely not enough to prompt a reduction in borrowing costs when the Federal Reserves announces its next decision on 12 June, writes Andrew Michael.
Today’s numbers from the Labor Bureau of Statistics also showed that inflation ticked up by 0.3% in April itself, compared with a 0.4 percentage point rise in March.
According to the Bureau, rises in the cost of housing and fuel were responsible for nearly three-quarters of the overall monthly increase.
The core US annual inflation rate, which omits volatile food and energy prices, rose by 3.6% in the year to April, down from 3.8% a month earlier. The Bureau reported a 0.3 percentage point rise for the core monthly figure in April, down slightly on the 0.4% rise recorded a month earlier.
Having raised borrowing costs aggressively last year to 5.25%, the Federal Reserve, the US central bank, appeared to be winning the challenge of bringing soaring inflation levels back down to their long-term target of 2% (which is shared by the Bank of England and other central banks).
In recent months, however, returning inflation to this target has proved trickier than expected.
Lindsay James, investment strategist at Quilter Investors, said: “While on the surface it is positive to see US inflation fall from the previous month, looking at the trend over the…
