US CPI rises as expected in April, up by 0.4%

The cost of living in the US rose as expected in April, hitting a two-year low in the process.

According to the US Department of Labor, in seasonally adjusted terms, the country's Consumer Price Index rose at a month-on-month pace of 0.4% (consensus: 0.4%).

That pushed the annual rate of increase down from 5.0% to 4.9%.

At the core level meanwhile, CPI was up by 0.4% on the month (consensus:0.4%) and by 5.5% year-on-year.

The latter was down from the 5.6% pace of increase seen during the previous month.

In comparison to the previous month, food prices were flat and those for energy up by 0.6%.

At the core level meanwhile, which strips out food and energy, used car and truck prices bounced back by 4.4%.

However, the pace of increase in shelter prices slowed further, increasing by 0.4% over the month after a 0.6% increase in March.

Prices of new vehicles dipped 0.2%, transportation services by 0.2% and medical care services by 0.1%.

Commenting on the latest CPI data, Ian Shepherdson at Pantheon Macroeconomics judged that core inflation using the Federal Reserve's preferred price gauge appeared to be breaking lower.

"[....] Core services prices ex-rent rose only 0.11% in April, the smallest increase since July last year.

"This means the equivalent measure in the core PCE deflator, which the Fed is now watching very closely, is set for a third straight relatively benign reading. The trend appears to be breaking to the downside, and if that continues - as we expect - and the labor market softens, as implied by all the leading indicators, the Fed’s line of no rate cuts this year will soon become indefensible."

And two days before Shepherdson said that: "Even if unit labor costs continue to rise rapidly—for the record, we expect a slowdown as firms lay off staff and take a harder line on wage negotiations—the downward pressure from the other drivers will be powerful enough to drive inflation down substantially further."

Andrew Hunter, US deputy economist at Capital Economics on the other hand noted that core services prices ex-housing increased by 0.4% over the month, after a 0.3% increase in March.

"The previous downward trend [in core CPÎ] has stalled," he said.

"We don’t think that will in itself be enough to convince the Fed to hike again at the June FOMC meeting but it does suggest a risk that rates will need to remain high for a little longer than we have assumed."

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