US annual inflation slows to two-year low

The consumer price index (CPI) in the United States in April was 4.9% in annual terms after 5% in March, which was the lowest value since April 2021. This follows from data country’s labor ministry.

Compared to March, the indicator rose by 0.4% due to rising prices for housing, used cars and trucks and gasoline. At the same time, energy prices in general decreased by 5.1%, while food prices increased by 7.7%.

Core inflation (excluding food and energy prices, Core CPI) slowed to 5.5% y/y from 5.6% a month earlier. In monthly terms, the increase was 0.4% – the same as in March.

May 3 Federal Reserve System (FRS) USA raised base interest rate by 25 b.p. up to 5-5.25% per annum. The agency noted a moderate increase in economic activity in the first quarter of 2023. The unemployment rate remains low, while inflation is still elevated, the US Federal Reserve said.

The inflation target in the US is 2%. In March, inflation slowed to 5% in annual terms, core inflation was 5.6%. US GDP in the first quarter of this year grew by 1.1%, which is inferior to the indicator of the fourth quarter of 2022 (2.6%).

The last time the US Federal Reserve raised the rate to 4.75-5% per annum at the end of March. According to the agency’s median forecasts, by the end of 2023 the rate will be 5.1%, by the end of 2024 – 4.3%, and by the end of 2025 – 3.1%. The Fed’s March expectations have not changed since December 2022.