All items index increased 4.9 percent for the 12 months ending April, the smallest 12-month increase since the period ending April 2021, according to the Consumer Price Index Summary.

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Inflation rose during April at a higher rate than in March, but its annual growth rate remained lower than expected.

Data released Wednesday by the Bureau of Labor Statistics shows that the Consumer Price Index for All Urban Consumers rose 0.4 percent during April, after rising 0.1 percent during March. The index has grown 4.9 percent over the past year — slightly less than the 5 percent economists surveyed by the Wall Street Journal had predicted.

Source: U.S. Bureau of Labor Statistics

“The all items index increased 4.9 percent for the 12 months ending April; this was the smallest 12-month increase since the period ending April 2021,” the CPI Summary notes. “The all items less food and energy index rose 5.5 percent over the last 12 months. The energy index decreased 5.1 percent for the 12 months ending April, and the food index increased 7.7 percent over the last year.”

Source: U.S. Bureau of Labor Statistics

Housing remained the highest contributor to overall inflation, followed by used cars and gasoline. The shelter index rose 0.4 percent during April after rising 0.6 percent in March, while the index for rent rose 0.4 percent during April.

The index for owners’ equivalent rent rose 0.5 percent month over month, while the index for hotel rooms decreased 3 percent after increasing in each of the previous four months.

While the 4.9 percent annual growth rate represents progress, it is still well above the Federal Reserve’s 2 percent target, which it has been hiking interest rates in order to achieve, slowing the housing market in turn due to increased mortgage interest rates.

Lisa Sturtevant

“There has been a lot of speculation about why we aren’t seeing inflation come down faster,” Bright MLS Chief Economist Lisa Sturtevant said in a statement. “Maybe the conventional models explaining the relationship between interest rates and inflation simply don’t work in this unusual, post-pandemic economy. Maybe holding firm on a 2% target — a threshold that has a pretty arbitrary origin story — doesn’t make sense in today’s economy.”

The Fed raised interest rates for the tenth time at its last meeting but signaled that a potential pause may be imminent as the economy shows early signs of a recession.

Instead of continuing to hike interest rates and risk sending the economy into a recession, perhaps a better course of action is to allow time for consumers and businesses to fully react to the new, higher interest rate environment and growing economic uncertainty,” Sturtevant said. “Pausing would also allow housing costs a chance to catch up.”

Lawrence Yun

Lawrence Yun, chief economist for the National Association of Realtors, called the Fed’s latest interest hike a “mistake” and argued that rent prices — the biggest driver of inflation — will likely trend downward soon due to a 40-year high in new apartment construction.

“Therefore in my view the Fed made a mistake,” Yun said this week at the Realtors Legislative Meetings’ Residential Economic Issues and Trends Forum.

This week also saw the NAR propose tying its membership fees to inflation, with Yun predicting a 15 percent decline in membership over the next few years resulting in an estimated $10- $15 million budget deficit beginning in 2024.

Email Ben Verde

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