US inflation hit 8.3% last month but slows from 40-year high

Inflation slowed in April after seven months of relentless gains, a tentative sign that price increases may be peaking while still imposing a financial strain on American households.

Consumer prices jumped 8.3% last month from 12 months earlier, according to government data released Wednesday. That was below the 8.5% year-over-year surge in March, which was the highest rate since 1981.

But the consumer price index (CPI) for gasoline fell 6.1% in April compared to March, the Labor Department said.

Russia's unprovoked war against Ukraine is the main catalyst for the surge in gasoline prices. The war has also driven up global good prices.

On a month-to-month basis, prices rose 0.3% from March to April, a still-elevated rate but the smallest increase in eight months.

Consumer prices had spiked 1.2% from February to March, mostly because of a sudden jump in gas prices triggered by Russia’s invasion of Ukraine.

Nationally, the price of a gallon of regular gas has reached a record $4.40, according to AAA, though that figure isn’t adjusted for inflation.

The high price of oil is the main factor. A barrel of US benchmark crude sold for around $100 a barrel Tuesday. Gas had fallen to about $4.10 a gallon in April, after reaching $4.32 in March.

Inflation was already a problem before Moscow's February 24 invasion of Ukraine because of stretched global supply chains as economies emerged from the coronavirus pandemic after governments around the world injected large amounts of money in pandemic relief and central banks slashed interest rates.

On Tuesday, US President Joe Biden acknowledged the pain that high inflation was inflicting on American families and said bringing prices down "is my top domestic priority."

The Fed last week raised its policy interest rate by half a percentage point, the biggest hike in 22 years, and said it would begin trimming its bond holdings next month. The US central bank started raising rates in March.

Meanwhile, US stock index futures turned negative in volatile trading on Wednesday as consumer prices rose more than expected in April, fuelling concerns about aggressive monetary tightening.

At 08:31 am ET, Dow e-minis were down 2 points, or 0.01%, S&P 500 e-minis were down 6.25 points, or 0.16%, and Nasdaq 100 e-minis were down 52 points, or 0.42%.

The rout in stocks isn’t over just yet, according to Morgan Stanley strategist Michael Wilson, who sees scope for equities to correct further amid mounting concerns of slowing growth.

“We continue to believe that the US equity market is not priced for this slowdown in growth from current levels,” Wilson said in a note. “We expect equity volatility to remain elevated over the next 12 months.” He recommends defensive positioning with an overweight in health-care, utilities and real-estate stocks.