US Inflation Rate Jumps Again As Energy Costs Heap Pressure On Fed
- Energy drives headline CPI with 40% of monthly rise - Core inflation beats forecasts, on hot services and apparel - Shutdown distortions boost shelter costs - Fed officials warn on sticky inflation but avoid hike talk
The Bureau of Labor Statistics reported a further acceleration in inflation on Tuesday, highlighting the continued upside pressure from elevated oil prices.
Headline CPI increased an in-line 0.6% m/m on a seasonally adjusted basis in April, following a 0.9% rise previously. In the 12 months through April, CPI rose 3.8%, a tenth above forecasts and half a percentage point higher than in March.
As expected, energy prices were the primary driver of the increase. The BLS said the energy index rose 3.8% m/m, accounting for more than 40% of the monthly increase in the all-items index. Shelter rose 0.6%, while food prices increased 0.5% over the month.
Core CPI, which excludes food and energy, rose 0.4% m/m, double March’s pace and a tenth above estimates. The annual core rate accelerated two tenths to 2.8%, also ahead of expectations. Household furnishings and operations, airline fares, personal care, apparel and education all contributed to the increase. New vehicles, communication and medical care were among the categories that partially offset the rise.
Translating the data into the Fed’s preferred inflation gauge, Pooja Sriram of Barclays said: “Our translation to core PCE pegs the April estimate at 0.35% m/m (3.4% y/y). This is 7bp higher than our own estimate going into today’s release (0.28%) and largely reflects the higher translation into core goods PCE (0.34% m/m), despite a nearly flat core goods CPI print, due to category weight differences.”
Sriram added that tariff pressures appeared to be easing, noting that core goods price growth had slowed. “Apparel, however, continues to stand out as the category experiencing lagged tariff passthrough, with prices having increased for five consecutive months on a seasonally adjusted basis,” she concluded.
Government shutdown anomalies
Source: BLS, Barclays Research
Economists noted that the month-on-month core reading was temporarily boosted by the incorporation of rent and owners’ equivalent rent price increases that were missed during last year’s government shutdown.
Abiel Reinhart of JP Morgan noted that core ex-shelter inflation rose a moderate 0.19% m/m (2.3% annualised), while “supercore” inflation — core services excluding rent and OER — increased 0.45%, nearly 20 basis points faster than its trailing 12-month average.
“Inflation remains firm enough to continue to be a concern for the FOMC,” Reinhart said.
Inflation disappoints rate setters
Recent commentary from Federal Reserve officials has led markets to price out the probability of a rate move in either direction this year.
Policymakers have largely stuck to the view that policy remains appropriately restrictive for now, while stopping short of explicitly endorsing renewed rate hikes.
Austan Goolsbee of the Federal Reserve Bank of Chicago, speaking shortly after Tuesday’s CPI release, said he was “disappointed” by the data. He added that he was particularly concerned by persistent services inflation, rather than just rising “oil and tariff-related things.”
Meanwhile, John Williams of the Federal Reserve Bank of New York said on 4 May that policy was “well positioned” to handle uncertainty stemming from the Middle East conflict and elevated energy prices. He added that inflation was likely to remain near the current 3% level for some time before gradually returning to target, while cautioning that further energy shocks could complicate the outlook.
Nevertheless, if JP Morgan's assumptions come to fruition, investors could soon see the end of higher fuel costs.
“A core assumption of our framework is that the accelerating pace of oil inventory depletion will ultimately force the reopening of the Strait of Hormuz, one way or another,” the Global Commodities Research team wrote. “Our base case assumes the Strait reopens in June — anchored on 1 June for simplicity — following a clear and credible announcement ratified and confirmed by both sides, such as a statement from the UN Security Council.”
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- Energy drives headline CPI with 40% of monthly rise
- Core inflation beats forecasts, on hot services and apparel
- Shutdown distortions boost shelter costs
- Fed officials warn on sticky inflation but avoid hike talk
By Harry Daniels
LiveSquawk News
@HarryDaniels71
18:00 GMT | 12 May 2026
The Bureau of Labor Statistics reported a further acceleration in inflation on Tuesday, highlighting the continued upside pressure from elevated oil prices.
Headline CPI increased an in-line 0.6% m/m on a seasonally adjusted basis in April, following a 0.9% rise previously. In the 12 months through April, CPI rose 3.8%, a tenth above forecasts and half a percentage point higher than in March.
As expected, energy prices were the primary driver of the increase. The BLS said the energy index rose 3.8% m/m, accounting for more than 40% of the monthly increase in the all-items index. Shelter rose 0.6%, while food prices increased 0.5% over the month.
Core CPI, which excludes food and energy, rose 0.4% m/m, double March’s pace and a tenth above estimates. The annual core rate accelerated two tenths to 2.8%, also ahead of expectations. Household furnishings and operations, airline fares, personal care, apparel and education all contributed to the increase. New vehicles, communication and medical care were among the categories that partially offset the rise.
Translating the data into the Fed’s preferred inflation gauge, Pooja Sriram of Barclays said: “Our translation to core PCE pegs the April estimate at 0.35% m/m (3.4% y/y). This is 7bp higher than our own estimate going into today’s release (0.28%) and largely reflects the higher translation into core goods PCE (0.34% m/m), despite a nearly flat core goods CPI print, due to category weight differences.”
Sriram added that tariff pressures appeared to be easing, noting that core goods price growth had slowed. “Apparel, however, continues to stand out as the category experiencing lagged tariff passthrough, with prices having increased for five consecutive months on a seasonally adjusted basis,” she concluded.
Economists noted that the month-on-month core reading was temporarily boosted by the incorporation of rent and owners’ equivalent rent price increases that were missed during last year’s government shutdown.
Abiel Reinhart of JP Morgan noted that core ex-shelter inflation rose a moderate 0.19% m/m (2.3% annualised), while “supercore” inflation — core services excluding rent and OER — increased 0.45%, nearly 20 basis points faster than its trailing 12-month average.
“Inflation remains firm enough to continue to be a concern for the FOMC,” Reinhart said.
Recent commentary from Federal Reserve officials has led markets to price out the probability of a rate move in either direction this year.
Policymakers have largely stuck to the view that policy remains appropriately restrictive for now, while stopping short of explicitly endorsing renewed rate hikes.
Austan Goolsbee of the Federal Reserve Bank of Chicago, speaking shortly after Tuesday’s CPI release, said he was “disappointed” by the data. He added that he was particularly concerned by persistent services inflation, rather than just rising “oil and tariff-related things.”
Meanwhile, John Williams of the Federal Reserve Bank of New York said on 4 May that policy was “well positioned” to handle uncertainty stemming from the Middle East conflict and elevated energy prices. He added that inflation was likely to remain near the current 3% level for some time before gradually returning to target, while cautioning that further energy shocks could complicate the outlook.
Nevertheless, if JP Morgan's assumptions come to fruition, investors could soon see the end of higher fuel costs.
“A core assumption of our framework is that the accelerating pace of oil inventory depletion will ultimately force the reopening of the Strait of Hormuz, one way or another,” the Global Commodities Research team wrote. “Our base case assumes the Strait reopens in June — anchored on 1 June for simplicity — following a clear and credible announcement ratified and confirmed by both sides, such as a statement from the UN Security Council.”