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U.S. inflation accelerated to 3.8% annually in April as soaring gasoline and energy prices drove consumer costs higher, weakening expectations for Federal Reserve interest rate cuts this year.
Consumer prices rose 0.6% from the previous month, above market expectations of 3.7% annual inflation and up from 3.3% recorded in March.
The latest reading marked the highest inflation level since May 2023.
Energy costs drove much of the increase. Annual energy inflation reached 17.9% in April, while energy commodities rose 29.2% and gasoline prices jumped 28.4% from a year earlier. Compared to March, overall energy prices climbed 3.8%, with gasoline up 5.4%.
Core inflation, which excludes food and energy prices, rose 0.4% during the month and stood at 2.8% annually.
The rise in fuel costs came as the U.S.-Israel war on Iran disrupted energy markets across the Middle East. Iranian retaliatory actions targeting energy infrastructure and disruptions around the Strait of Hormuz pushed global oil prices above $100 per barrel.
Roughly one-fifth of global oil and natural gas shipments normally pass through the strategic waterway.
The data strengthened expectations that the Federal Reserve will leave interest rates unchanged at 3.5%-3.75% at its June 17 meeting and likely maintain current levels through the end of the year as it continues targeting 2% inflation.
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