Inflation hits highest level in nearly 3 years, Fed's preferred gauge shows
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Key Points:
- Inflation rose 3.8% in April compared to a year earlier, marking the highest level since May 2023, driven largely by increased gasoline prices due to the Iran war.
- The Personal Consumption Expenditures (PCE) Index, favored by the Federal Reserve, showed inflation climbing from 2.8% in February to 3.8% in April.
- The U.S. savings rate dropped to 2.6%, its lowest since 2022, indicating that many consumers are struggling to save amid rising costs.
- While futures markets expect the Federal Reserve to keep interest rates steady next month, there is over a one-in-three chance of a rate hike by the end of the year due to inflation pressures.
- The Iran conflict led to the closure of the Strait of Hormuz, disrupting about 20% of global oil supply and causing a significant oil shock that contributed to rising gasoline prices.