U.S. consumer inflation increased further in April, with the annual rate posting its largest gain in three years, heightening political risks for President Donald Trump and his Republican party ahead of November’s midterm elections.
The consumer price inflation accelerated to +3.8%yoy in Apr-26, up from +3.3%yoy in the previous month. This marked the highest reading since May-23 as the sustained oil shock from the Iran conflict exerts upward pressure on prices. Price surged for the energy sector by +17.9%yoy (Mar-26: +12.5%yoy), recording the steepest rise since Sep-22 led by the surge in gasoline (+28.4%yoy) and fuel oil (+54.3%yoy).
Price for shelter increased by +3.3%yoy, whereas food inflation moderated to +2.3%yoy. On a monthly basis, inflation rose by +0.6%mom (Mar-26: +0.9%mom), though at a slower pace. This was mainly driven by elevated energy prices (+3.8%mom; Mar-26: +10.9%mom). Underlying price pressure surged, with inflation for core CPI (excluding food and energy) also accelerating to +2.8%yoy (Mar-26: +2.6%yoy). On a monthly basis, core CPI increased faster by +0.4%mom after recording an unchanged reading of +0.2%mom in the previous two months.
With no clear end to the conflict with Iran in sight, prices are expected to rise further in the coming months, driven mainly by energy-related inflation. The situation is further compounded by shipping disruptions in the Strait of Hormuz, which continue to strain global supply chains. MBSB, in its research note, said core inflation is expected to trend higher as rising costs of jet fuel, diesel, plastics, and fertilizer keep price pressures elevated across the transport and manufacturing sectors.
In addition, the report quoted that fertiliser shortages could contribute to higher food costs. These persistent inflationary pressures, coupled with the larger-than-expected increase in nonfarm payrolls in Apr-26, support the case for the Fed to keep interest rates steady for now, while raising discussions over whether policymakers may need to maintain a tighter policy stance for longer to contain inflationary pressures.
