The persistent stickiness of inflation: Chart of the Week

The latest Consumer Price Index report for April brought some relief as it showed that inflation isn’t heating back up, according to the Morning Brief. However, the report also highlighted that services inflation, particularly housing costs, remains stubbornly high.

Core goods, food, and energy prices have either declined or even gone negative, but core services, which include housing and medical care, rose by 3.15% over the previous year. This figure, although slightly lower than March’s rate, is still higher than what was seen in the previous months.

Housing costs, in particular, rose by 5.5% in April, making up two-thirds of the increase in core inflation. When combined with energy costs, these two factors accounted for over 70% of the overall price increase last month.

Bank of America economist Michael Gapen noted that the increase in services inflation may be due to the shift in spending from goods to services, as wage growth remains strong and demand continues to be high. However, Bank of America predicts that services and shelter inflation will cool off as the year progresses.

Despite the optimism, there is still caution surrounding the Federal Reserve’s handling of inflation. With the Fed already facing criticism for underestimating the severity of the inflation problem, there is a reluctance to declare victory prematurely.

As the economy continues to evolve, it will be crucial to monitor these inflation trends closely to make informed investing decisions. Stay updated with the latest economic news and indicators to navigate the changing financial landscape.