Inflation picked up speed in April, reaching an annual rate of 3.8% - the highest mark since May 2023 - driven by the Iran war that boosted energy expenses and lifted costs throughout the economy.

By the numbers

Economists had forecasted inflation climbing to 3.7% annually, a step up from March's 3.3%, based on a FactSet survey.

The CPI measures price shifts in a typical basket of consumer goods and services. It increased by 0.6% in April compared to the previous month.

Energy costs led the charge, making up 40% of the overall CPI rise, per the Labor Department. Year-over-year, gasoline prices surged 28.4%.

The Iran war, which erupted in March, has tightened global oil supplies, propelling gas prices to levels not seen since July 2022 and hiking transport expenses for motorists and companies alike. Airline tickets also leaped 20.7% annually in April.

Core inflation, stripping out fluctuating food and energy, advanced 2.8% year-over-year, indicating broader price pressures beyond just fuel.

In a Monday phone interview with CBS News, President Trump announced plans to suspend the federal gas tax - 18.4 cents per gallon for regular gas and 24.4 cents for diesel - temporarily. Analysts note this could offer only limited relief for American drivers.

During the same interview, the president dismissed calls for bailouts to U.S. airlines grappling with elevated jet fuel prices. Many airlines have raised fares amid these costs, hitting travelers hard as the summer travel season begins.

What the experts say

The steep fuel price hike is straining household budgets, adding about $75 monthly to average expenses, according to Heather Long, chief economist at Navy Federal Credit Union, via email.

"Inflation stands as the primary burden on the U.S. economy today," Long stated. "It's impacting everyday Americans with a genuine financial pinch. For the first time in three years, rising prices are fully offsetting wage increases."

Mark Zandi, chief economist at Moody's Analytics, anticipates inflation will continue rising through summer, even if the war wraps up soon, before easing to 3.3% by year's end.

War-related energy spikes will raise grocery and goods prices transported by diesel trucks, he explained to CBS News prior to the CPI data.

"These effects will extend to virtually all manufactured items, which rely heavily on energy, plus farming and building sectors," Zandi wrote in an email.

What does it mean for the Fed and interest rates?

As inflation climbs and job growth stalls, the Federal Reserve is unlikely to slash rates in the near term, said Chris Zaccarelli, chief investment officer at Northlight Asset Management, in an email.

Bank of America recently revised its forecast, now expecting no Fed rate cuts before late 2027.

CME Group's FedWatch tool reflects market views with under 50% odds of cuts before March 2027.

In:

Iran
Consumer Price Index
Inflation