US Inflation Climbs to 3.8% as Iran War Drives Up Energy Prices
US consumer prices rose 3.8% year on year in April, the highest reading since May 2023, as the Iran war pushed energy costs sharply higher. The Labor Department release matched analyst forecasts but undermined expectations of further Federal Reserve rate cuts. Bond yields jumped on the news.
The US Labor Department reported on Tuesday that the Consumer Price Index rose 3.8% in April from a year earlier. That marks the highest reading since May 2023 and a sharp acceleration from March's 3.2% pace. The figures reflect the impact of the month-long Iran war on global energy markets.
Gasoline prices jumped 12.4% during the month, while household heating and electricity bills also climbed at a rapid clip. Core inflation, which strips out food and energy, held at 3.4% as services costs stayed sticky. Apparel and airfares recorded notable monthly gains as well.
Following the release, the 10-year Treasury yield pushed above 5% and the dollar strengthened against major peers. Investors are now pricing in delays to the Federal Reserve's planned rate cuts for the year. Economists quoted by the BBC said inflation persistence could deepen if tensions in the Strait of Hormuz continue to disrupt oil flows.
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