Core consumer prices in the US rose more than expected year-on-year in April, largely due to a sharp, albeit slowing, jump in gasoline prices.
Analysts are closely monitoring incoming inflation data, trying to assess the impact of the energy shock caused by the war in Iran and the future course of the Federal Reserve's interest rate policy.
The Consumer Price Index (CPI) rose 3.8% in the twelve months through April, faster than economists' forecasts of 3.7% and the 3.3% increase in March.
However, the Labor Department's monthly reading slowed to 0.6% from 0.9%, in line with expectations. Gasoline prices at the pump, currently around $4.50 per gallon compared to $3.14 a year ago, are one of the most noticeable factors affected by the conflict, which has lasted more than two months. Seasonally adjusted, gasoline prices are up 5.4% month-over-month, compared to 21.2% in March.
Importantly, the fighting in the Middle East has effectively closed the Strait of Hormuz, a vital route for one-fifth of the world's oil supplies. As a result, global crude oil prices have risen sharply.
The overall energy index rose 3.8% in April, accounting for more than 40 percent of the monthly increase in consumer prices.
However, there is debate about how much the United States, as a net energy exporter, will be protected from rising oil prices overall. Much attention is being paid to whether prices for a broader range of commodities will rise. The so-called "core" CPI, which excludes volatile items such as food and fuel, accelerated in April to 2.8% year-on-year and 0.4% month-on-month. Economists had forecast 2.7% and 0.3%, respectively.
The rise in indices for items such as household goods and services, airline tickets, personal care, clothing, and education was partially offset by lower prices for new cars, communications, and healthcare.