Consumer prices increased in April at the fastest yearly pace in almost 13 years as America’s economy emerged from lockdown.

The Labor Department announced on Wednesday that prices rose by 4.2% year over year, giving the largest rise since Sept. 2008. Prices jumped 0.8% month over month, speeding up from the 0.6% jump in March.

Analysts polled by Refinitiv were anticipating prices to increase 3.6% from just a year ago and 0.2% compared to last month.

The yearly data has a “base effects” skew because of the pullback in prices that happened at the beginning of the pandemic.

Used auto prices surged by 10% in April, accounting for one-third of the index’s total gain. The price increases were the biggest for the sector since record-keeping started in 1953. Food prices also went up by 0.4% from the previous month. Energy prices fell as a drop in gasoline prices was offset by increases in natural gas and electricity.

Core prices, which do not include food or energy, increased by 0.9% in April, making up the biggest monthly increase since 1982. They were higher by 3% compared to last year. Analysts polled were expecting increases of 0.3% and 2.3%, respectively. Almost every component experienced a price increase.

This rise in prices, which has come after an unprecedented fiscal stimulus that was used to fight the economic slowdown triggered by the pandemic, has some investors weighing the potential for the Federal Reserve to change its plans for future monetary policy.

In 2020, the Fed lowered interest rates to almost zero and said it would continue to purchase an unlimited amount of assets to cushion the economy after the biggest slowdown since World War II. The central bank has announced it would hold rates close to zero, even if inflation were to go higher than its preferred 2%.

 

Author: Steven Sinclaire

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