Inflation slowed to a 2.2 percent annual rate in April, the Bureau of Labor Statistics reported Friday in a release of the Consumer Price Index that suggested that inflationary pressures have eased off in recent months.
Inflation was even lower than forecasters’ expectations, which it to slow for a second straight month to 2.3 percent annually.
Slow consumer price gains are good for families, as they mean that money retains its purchasing power longer.
The Federal Reserve, however, has been seeking slightly higher inflation in order to hit its inflation target. The central bank doesn’t favor higher inflation for its own sake, but rather as a sign that the economy is healing and not weakening. Friday’s low inflation number could lower the odds the Fed officials raise interest rates at their next meeting in June.
Core inflation, at 1.9 percent, slowed to the slowest rate since October of 2015. Core inflation, which excludes energy and food prices because of their volatility, is thought to be more predictive of future inflation than the headline number.
Part of the slowdown is a historic collapse in cell phone service prices. Wireless services have dropped by 13 percent in the past year, the biggest decline since 2001. Overall, communications prices fell by the largest amount since they’ve been recorded.
“[T]he weakness in phone services prices in particular looks like an outlier,” noted Jim O’Sullivan, economist for the forecasting firm High Frequency Economics. Nevertheless, he remarked, the “tame” inflation numbers might lower pressure on the Federal Reserve to respond to the very low 4.4 unemployment rate by raising interest rates.
The Fed targets 2 percent inflation over the long term. But it uses a different gauge of inflation, one that has run lower than the Consumer Price Index. The latest report for that metric showed inflation ticking down to 1.8 percent.
