SUMMARY

• Consumer prices increased by 4.9% YoY, but grocery costs continued to moderate, causing inflation to slow down for the tenth month in a row.
• The Fed's ten consecutive rate hikes made it more expensive to borrow, and there were both winners and losers in terms of inflation.
• While gas prices rose, they're still down from last year, and although used car prices surged, they're still down from last year.

Inflation is still on everyone's mind, but there is some good news to report. In April, inflation slowed for the tenth straight month as grocery costs continued to moderate. While gasoline prices rose, the increased cost was offset by a drop in grocery prices for the second consecutive month. Consumer prices were up by 4.9% year-over-year, a decrease from March's 5%, and down from the 40-year high of 9.1% in June 2022. The monthly increase of prices was 0.4%, compared to the previous month's 0.1% rise.

However, the core inflation measure that captures longer-lasting trends still remains elevated. Although the report reveals an uneven road to normal inflation levels, it suggests that inflation is continuing to cool. For instance, airline fares and hotel prices dropped, and while rental costs rose, they did so at a slower pace. Inflation remains sticky and bumpy, but the trend is cooling, according to Gregory Daco, Chief Economist at EY-Parthenon.

Inflation winners and losers are evident, with the Fed's ten consecutive rate hikes making it more expensive to borrow. Credit card APRs have increased, and so have Freddie Mac's 30-year mortgage rates, which means monthly payments are spiking. While home sales have fallen, there is hope that mortgage rates will decline further by the end of the year if consumer prices continue to slip.

The Fed raised its key short-term interest rate by a quarter of a percentage point last week, its tenth rate hike in a row. However, it signaled that it might pause further boosts as it waits to see if its string of rate increases, and the tighter lending standards imposed after the failure of Silicon Valley Bank, do their part to tame inflation.

In the end, the inflation report offers a mixed bag of news for American shoppers and drivers. While gas prices increased, they are down from a year ago. Pump prices have fallen in recent weeks, and grocery prices edged down by 0.2%, the second consecutive monthly drop. Although used car prices jumped, they are still down from last year.

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