Economy Watch: Inflation Edges Up in April

The Consumer Price Index increased 0.2 percent for the month, according to the Bureau of Labor Statistics. While it's not the only metric the Federal Open Market Committee considers, the increase could increase the odds that interest rates will rise next month.
Source: U.S. Bureau of Labor Statistics
Source: U.S. Bureau of Labor Statistics

The Consumer Price Index increased 0.2 percent in April, the Bureau of Labor Statistics reported on Friday. That compares with a drop of 0.3 percent in March. Over the last 12 months, the index has risen 2.2 percent. On the other hand, the core rate of inflation—which takes energy and food prices out of the equation—was up only 0.1 percent for the month, and 1.9 percent for the year.

Increases in prices for shelter, energy, tobacco and food all contributed to the monthly increase in the all items index. Energy in particular saw a rise, gaining 1.1 percent, with all of its major components rising, including gasoline, which has an indirect impact on consumer spending. Food prices were up 0.2 percent, mostly due to a sharp increase in the price of fresh vegetables.

By contrast, prices were down in April for a number of goods and services. Wireless phone services, medical care, motor vehicle insurance, apparel, used cars and trucks, recreation, and new vehicles all cost less in April than March.

The inflation report may have some bearing on what the Federal Open Market Committee does the next time it meets, which will be June 13-14. Though the CPI isn’t the only inflation metric that the central bank considers, it seems to be an important one, and the relatively strong increases probably ups the odds that interest rates will rise next month.