US Inflation Rose To Highest Level In 3 Years Due To High Energy Prices, Iran War

US inflation increased at its fastest rate in three years, driven by high energy prices amid the conflict with Iran, the Personal Consumption Expenditures price index for April revealed.

Seen as the Federal Reserve's preferred gauge for inflation, the index increased 3.8% ‌in the 12 months through April, marking the largest rise since May 2023, Reuters stated, quoting the Commerce Department's Bureau of Economic Analysis on Thursday.

PCE inflation rose by an unrevised 3.5% in March, the outlet said.

The Personal Consumption Expenditures price index increased 0.4% in April from the month before, marking a minor slump from the 0.7% increase registered in March.

The core PCE price index increased 0.2% for the month, which was slower than expectations, CNN reported. However, the annual rate rose to 3.3%.

Spending rose 0.5% in April, compared to a 1% increase the month before. Taking inflation into account, consumer spending rose just 0.1%.

Not just that, gas prices also continued to increase in April. The national average retail ⁠gasoline price jumped 12.3%, according to data from the U.S. Energy Information Administration. Gas prices have surged over 50% since the war between the US and Iran started at the end of February.



The data has cemented beliefs among many economists that the Federal Reserve may keep interest rates unchanged well into next year, as per Reuters.


The Federal Reserve tracks the PCE inflation measures to keep to its 2% target. Financial markets expect the central bank may keep its benchmark overnight interest rate in the range of 3.50%-3.75% well into next year.


Minutes of the Federal Reserve's April 28-29 meeting, however, showed that a growing number of policymakers are open to ‌the possibility that they may have to hike rates.


Data also revealed that gross domestic product (GDP) growth in the first quarter was less than expected, CNBC reported. GDP rose at an annualised rate of just 1.6% for the quarter, as per a revised Commerce Department reading, well below the initial estimate of 2%. The department cited downward revisions in consumer spending and investment as the reason for the updated estimate.


Stock market futures remained negative after the data but did reach their lows. Treasury yields, primarily those of longer-duration, were slightly negative, as per CNBC.