U.S. CPI rises by slower-than-expected 4.9% in April

Investing.com -- U.S. inflation slowed marginally in April, while the gauge of core prices closely watched by the Federal Reserve decelerated slightly but remained stubbornly elevated.

According to data from the Bureau of Labor Statistics (BLS) on Wednesday, the U.S. consumer price index in April rose 4.9% on an annualized basis. Economists had expected the number to hold steady at the 5% level registered in March. 

Meanwhile, the core reading, which strips out volatile items like food and energy, moved up by 5.5% year-on-year, easing slightly from 5.6% in March. On a month-on-month basis, both the headline inflation and the core figure increased by 0.4%, which the BLS said was due in part to an uptick in costs for shelter and used cars.

The numbers were still well above the Fed's desired rate of around 2% to achieve stable and sustainable growth, even though the central bank has embarked on a long-running campaign of borrowing cost hikes aimed at corraling price growth. Following a 25 basis point hike last week, the Fed's benchmark rate now stands at a range of between 5% to 5.25%, up from near-zero at the beginning of 2022.

The Fed has hinted that it may push pause on the tightening campaign at its next meeting in June, although Chair Jerome Powell noted that it is "prepared to do more" if further policy restraint is necessary.

Complicating the decision-making process for the Fed is the U.S. job market, which has shown signs of resilience despite the jump in borrowing costs. The economy added 253,000 roles last month, topping projections of 180,000, while the unemployment rate edged down to 3.4%.

"What they need is a significant loosening of the labor market and while there are some nooks and crannies of it that have softened a tad, they are still a long way from achieving the type of softening needed to sustainably bring inflation to their mandate," wrote Bob Elliott, chief executive officer at Unlimited Funds, in a tweet.

Investors will have a chance to further flesh out the inflation picture when the latest producer price index is released on Thursday.

U.S. stock markets opened higher following the inflation data, with the blue-chip Dow Jones Industrial Average gaining 157 points or 0.47%, the broad-based S&P 500 adding 29 points or 0.71%, and the tech-heavy Nasdaq Composite increasing by 116 points or 0.96%.