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Inflation rate falls below 5% for first time since June 2021

Consumer Price Index up 0.4% in April
Consumer price index rose 0.4% in April as inflation slows 05:22

Inflation cooled slightly in April, with consumer prices rising at a 4.9% annual pace, marking the first time since June 2021 that the rate has dropped below 5%. It's also the slowest rise in two years, the Bureau of Labor Statistics said Wednesday. 

Core inflation, which excludes volatile energy and food costs, increased at a 5.5% rate. 

For two years, high inflation has been a significant burden for America's consumers, an ongoing threat to the economy and a frustrating challenge for the Federal Reserve, which has hiked its key interest rate at the fastest pace since the 1980s to try to slow the economy and put the brakes on price increases.

The nation's inflation rate has steadily cooled since peaking at 9.1% last June but remains far above the Federal Reserve's 2% target rate.

"Today's report suggests that the Fed's campaign to quell inflation is working, albeit more slowly than they would like," Quincy Krosby, chief global strategist for LPL Financial, said in an email.

The rising cost of housing was the biggest contributor to the increase in inflation last month, followed by increases in the price of gasoline and used cars, the BLS said. Those increases were offset by drops in the price of airfares and food away from home.

Economists had expected annual inflation to stay flat in April and core inflation to accelerate. The surprise drop cheered investors, with stock indexes swinging from losses to gains after the CPI's release. 

The Fed and many economists closely monitor core prices, which are regarded as a better measure of longer-term inflation trends. One major driver of core inflation — apartment costs and other housing expenses — surged 8.1% in April from 12 months earlier, barely below their 8.2% increase in March. 

That is raising concerns in some quarters that inflation has become persistent, or "sticky," and that bringing overall price increases down the Fed's 2% annual target will be a long and painful process.

"Inflation has moved beyond sticky at this point and after three months of core CPI hanging above 5%, it's become tenacious. Given the biggest contributor to high CPI once again was shelter, and home sales prices have hit their own plateau, we may not see significant drops in CPI until this fall," said Robert Frick, corporate economist with Navy Federal Credit Union.

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