Inflation at a glance: Everything you need to know about the most recent reading.
Taking a closer look…
- Continuing the 2026 trend, inflation edged higher in April rising to 3.8% (year-over-year). This reading came in slightly higher than market expectations.1
- What caused inflation to rise? Unsurprisingly, energy prices were the primary contributor to April’s inflation increase. With the ongoing Middle East tensions, and continued disruption of cargo travel through the Strait of Hormuz, energy prices rose 17.9% year-over-year, with gasoline up 28.4%.1 Elevated gas prices penetrate supply chains well beyond the pump, as higher transportation costs can push the prices of other goods, such as food and clothing, upwards.
- What’s the impact on consumers? While wages grew 3.6% in April (year-over-year), that growth rate was lower than inflation. This means for the first time in 3 years inflation outpaced wage growth. Real hourly earnings (i.e., adjusted for inflation) have ticked down, which could lead to a decline in consumer spending.2
- Is this going to prompt action by the US Federal Reserve (the Fed)? Probably not anytime soon. Even though the labor market is showing signs of stabilizing, persistently high inflation, historically low consumer sentiment, and a decline in real earnings mean that the Fed will likely take its time before making any changes to interest rates.
- The market increasingly expects inflation to remain higher for longer. This underscores the benefits of a diversified portfolio. For more insights on how to manage your spending and investments in a higher inflation environment read this recent Viewpoints article.
Institutional Portfolio Manager, Strategic Advisers
"While inflation continues to rise, the US economy remains on solid ground with strong corporate earnings growth, a stabilizing job market, and consumers that still show willingness and capacity to spend."
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