U.S inflation at 3.4% in april

U.S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut.

Those expectations were further bolstered by other data on Wednesday showing retail sales were unexpectedly flat last month as inflation-weary consumers cut back spending at online retailers and auto dealerships.

The reports suggested that domestic demand was cooling, which is likely to be welcomed by officials at the U.S. central bank as they try to engineer a "soft-landing" for the economy.

"The economic data are picture perfect this morning in favor of interest rate cuts with retail sales unchanged and inflation cooling and slowing down from the worrisome first quarter pace," said Christopher Rupkey, chief economist at FWDBONDS. "The country is not out of the woods from the threat of inflation, but we can start to see the end of the forest."

The consumer price index rose 0.3% last month after advancing 0.4% in March and February, the Labor Department's Bureau of Labor Statistics (BLS) said. The higher cost of living looms large over the Nov. 5 presidential election.

The cost of shelter, which includes rents, increased 0.4%, rising by the same margin for the third straight month. Gasoline prices shot up 2.8% after rising 1.7% in March. These two categories contributed over 70% of the monthly increase in the CPI. Food prices were unchanged after edging up 0.1% in March.

Food prices at the supermarket declined 0.2%, with eggs, meat, poultry and fish cheaper as were fruits and vegetables and nonalcoholic beverages. But cereals and bakery products cost more, while prices for dairy and related products rose marginally.

In the 12 months through April, the CPI increased 3.4% after climbing 3.5% in March. Economists polled by Reuters had forecast the CPI gaining 0.4% on the month and 3.4% year-on-year. The annual increase in consumer prices has dropped from a peak of 9.1% in June 2022, though progress has stalled.

Inflation accelerated in the first quarter amid strong domestic demand after moderating for much of last year. Last month's slowdown was a relief after data on Tuesday showed a jump in producer prices in April.