U.S. Inflation Hits 3.8% in April as Energy Costs Jump

U.S. consumer prices rose 3.8% in April from a year earlier, the fastest annual pace since May 2023, according to a Labor Department report released Tuesday. The increase followed a 3.3% rise in March and was attributed in part to higher energy costs linked to a conflict in the Middle East. Energy prices rose 3.8% from the prior month, the repoSources said.

So-called core inflation, which excludes food and energy, also firmed. The core Consumer Price Index rose 2.8% year over year in April, up from 2.6% in March, indicating that price pressures extended beyond gasoline and other fuel-related categories.

The data adds to a challenging backdrop for households as inflation outpaces wage growth. Average hourly earnings rose 3.6% over the past year, but real wages fell 0.5% in April, the second consecutive monthly decline, according to the report.

Energy prices spill into transportation

Higher fuel costs fed into transportation-related prices in April. Airline fares rose 2.8% during the month, reflecting the broader impact of rising energy costs across parts of the economy that rely heavily on fuel.

Economists at RSM said the inflation rate could climb further in coming months. They project inflation could peak “at or above” 4.5% on an annual basis this summer as the supply shock tied to the Middle East conflict continues to work through the U.S. economy.

Food costs rise as tariffs and weather weigh

Food prices also contributed to pressure on household budgets. Grocery costs rose 2.9% from a year earlier, with beef prices supported by smaller cattle herds, according to the report’s breakdown.

Tomato prices were up nearly 40% from a year ago, a rise attributed to a combination of tariffs, severe weather, and higher fuel costs. Steel tariffs were also cited as a factor pushing up the price of canned goods.

The hotter-than-expected inflation reading could complicate the Federal Reserve’s path. While the central bank has said it typically looks past short-term swings in energy prices, the report weakens the case for interest rate cuts this year, the article said.

Investors and policymakers will be watching whether energy-driven price increases fade or broaden further into core categories in coming months, as well as whether wage growth strengthens enough to offset inflation pressures.