US inflation hits 3.8 per cent, highest since May 2023, as Iran war fuels energy price surge – Firstpost

US consumer inflation accelerated sharply in April, with rising energy and food prices pushing inflation to its highest level in nearly three years as the economic fallout of the Iran conflict intensified.

According to the latest Consumer Price Index (CPI) data released by the US Bureau of Labor Statistics, headline inflation rose 3.8 per cent year-on-year in April, up from 3.3 per cent in March and marking the highest annual inflation reading since May 2023. On a monthly basis, CPI increased 0.6 per cent.

The surge was largely driven by soaring energy costs after oil prices climbed above $100 per barrel following the US-Israel conflict involving Iran and disruptions around the Strait of Hormuz, one of the world’s most critical oil shipping routes. Gasoline prices in the United States jumped sharply, with the national average price for unleaded fuel reaching $4.50 per gallon, the highest since July 2022.

Core inflation, which excludes food and energy prices, also remained elevated. Core CPI rose 2.8 per cent annually in April, significantly above the Federal Reserve’s long-term target of 2 per cent. Shelter, airline fares, apparel and household furnishing costs also recorded notable increases, indicating broader inflationary pressures across the economy.

The inflation spike has further reduced expectations of near-term interest rate cuts by the Federal Reserve. Financial markets are now increasingly pricing in the possibility that the Fed may keep rates elevated for longer, with some analysts even warning that further rate hikes cannot be ruled out if inflationary pressures persist.

The latest data also highlighted growing pressure on American households. Real wages declined in April as inflation outpaced income growth for the first time in three years. Average hourly earnings grew 3.6 per cent annually, below the inflation rate of 3.8 per cent, effectively reducing consumer purchasing power.

The inflation surge poses a fresh political challenge for US President Donald Trump ahead of the November midterm elections, especially after his re-election campaign strongly focused on reducing inflation and lowering living costs for Americans.