US inflation jumped to 3.8% in April as the war in the Middle East continued to drive energy prices and everyday costs for Americans.
Prices rose 3.8% over the last year, according to the data from the Bureau of Labor Statistics, the highest jump since 2023.
This is the second official measure of the consumer price index, which measures the price of a basket of goods and services, since the start of the war with Iran. In March, prices rose 3.3%, up from 2.4% in February.
Line chart of the US inflation rate
Energy prices rose 3.8% in April, accounting for over 40% of the overall monthly increase. Gas prices were up 28.4%, an increase many Americans have already noticed at the pump. The national average price for a gallon of gas has been steadily increasing in the months since the US-Israel war with Iran began, and stands at more than a dollar higher than a year ago, according to data from AAA.
Higher energy prices directly stems from the ongoing closure of the strait of Hormuz, where a fifth of the world’s oil and gas would typically pass through. Oil prices continued to climb Monday after Donald Trump called Iran’s response to US peace proposals “totally unacceptable”. Iran suggested a shorter moratorium period and refused to dismantle its nuclear facilities.
Airfares also rose 20.7%, an increase that many travelers are already starting to notice. Costs essential to everyday living also increased across the board: food prices increased by 3.8%, while energy services, which includes electricity and utilities, rose 5.4%.
Core CPI – which excludes volatile food and energy prices – increased more modestly, at 2.8%.
A recent survey from the University of Michigan on US consumer sentiment reflected these worsening price conditions. Consumer sentiment in May dropped notably compared to the same periods the year before, it found, as did confidence in financial institutions such as the Federal Reserve. Those readings were similar to how Americans were feeling in 2022, when inflation reached peak highs.
It’s not just Americans who are feeling the costs war: Australia, Canada, South Korea and other countries have all reported rapidly rising inflation. British households are bracing for a new cost of living crisis, according to a new survey from PwC released on Monday, and Asia’s manufacturing sector has already reported signs of strain and started to drive up costs.
Despite the rise in prices, the Trump administration is still continuing its campaign for lower interest rates, which would make borrowing money cheaper in the US. The Fed typically raises interest rates during times of heightened inflation in order to cool spending and ease prices.
Though Kevin Warsh, the incoming US Federal Reserve chair, has made it clear he agrees interest rates should be lower, rising inflation may make it harder for him to make the case to do so. The Fed has long cited a target inflation rate of 2%, though rates have stubbornly remained higher.
Warsh will have to convince the rest of the Fed’s 11 voting members that, despite increasing prices, the Fed should continue cutting rates. Just one member of the board voted to lower rates at its meeting last month, with the board citing slow job growth and uncertainty in the Middle East as key factors in its decision. Rates currently sit at a range of 3.5% to 3.75%.
The US Senate is expected to confirm Warsh as Fed chair in the coming days. The end of outgoing Fed chair Jerome Powell’s term is on Friday.
