PrintInflation Jumps To 3.8% In April, Kills Fed Rate-Cut Hopes (UPDATED)
BY Benzinga | ECONOMIC | 09:05 AM EDTEditor’s note: This article was updated to add more detail and context.
Price pressures intensified further in April as the energy shock from the Strait of Hormuz blockade reverberated across the Consumer Price Index basket.
The headline inflation rate climbed from 3.3% year-over-year in March to 3.8% in April, topping economist expectations of 3.7%, the Bureau of Labor Statistics reported Tuesday.
The outcome marks the hottest reading since May 2023 and effectively shuts the door on any near-term Fed rate cut hopes.
On a monthly basis, prices rose 0.6%, matching the 0.6% consensus after March’s 0.9% print.
Stripping out food and energy, core inflation ticked higher to 2.8% from 2.6%, topping the 2.7% forecast. Underlying month-over-month pressures rose 0.4%, accelerating from the prior 0.2% against a 0.3% consensus.
Energy Leads The Charge, Shelter Reaccelerates
The energy index rose 3.8% in April, accounting for over 40% of the monthly all-items increase.
Gasoline prices jumped 5.4% month-over-month and are now up 28.4% year-over-year, while fuel oil surged 5.8% and is running 54.3% higher than a year ago.
Electricity climbed 2.1% on the month and 6.1% annually. The broader energy basket has now risen 17.9% over the past 12 months ? the most aggressive 12-month surge in years.
Shelter, the stickiest component of core inflation, reaccelerated to 0.6% month-over-month from 0.3% in March, lifting its annual pace to 3.3%. Owners’ equivalent rent rose 0.5%, while lodging away from home ? the most volatile shelter subcomponent ? jumped 2.4% on the month.
Where Prices Ran Hottest And Coldest In April
The largest monthly seasonally adjusted increases came from:
- Fresh vegetables, with tomatoes alone up 15.1% on the month
- Airline fares, up 2.8%
- Beef and veal, up 2.7%
- Jewelry, up 3.7%
- Coffee, up 2.0%
- Personal care products, up 0.7%
- Household furnishings and operations, up 0.7%
- Apparel, up 0.6%
On a year-over-year basis, the hottest categories were fuel oil (+54.3%), gasoline (+28.4%), airline fares (+20.7%), coffee (+18.5%), jewelry (+14.6%), beef and veal (+14.8%) and tomatoes (+39.7%).
Conversely, the indexes for new vehicles (-0.2%), communication (-0.2%) and medical care (-0.1%) declined in April, offering modest offsets. Eggs collapsed 39.2% year-over-year.
Market Reaction
The SPDR S&P 500 ETF Trust
Crude oil futures jumped above $101 a barrel, up 3.2%, while gold fell 0.7% pressured by a stronger dollar and rising Treasury yields.
Short-term interest-rate futures remained pinned to a hawkish trajectory.
According to CME FedWatch, traders are now pricing a probability of over 70% of a Fed rate hike by April 2027, with the door to cuts firmly shut through year-end.
The April print cements what Wall Street has been reluctant to price in: the Hormuz shock is no longer a contained geopolitical premium but a structural force feeding through the entire inflation pipeline.
Rate-Hike Odds Jump After Hot April Inflation
<figure class="wp-block-table is-style-stripes">| 1 Cut | Hold | 1 Hike | |
|---|---|---|---|
| MEETING DATE | 3.25-3.50 | 3.50-3.75 | 3.75-4.00 |
| 17/06/2026 | 2,36% | 97,64% | 0,00% |
| 29/07/2026 | 4,50% | 95,50% | 0,00% |
| 16/09/2026 | 0,00% | 97,79% | 2,21% |
| 28/10/2026 | 0,00% | 84,50% | 15,50% |
| 09/12/2026 | 0,00% | 67,98% | 32,02% |
| 27/01/2027 | 0,00% | 56,50% | 43,50% |
| 17/03/2027 | 0,00% | 37,07% | 62,93% |
| 28/04/2027 | 0,00% | 28,50% | 71,50% |
| 09/06/2027 | 0,00% | 31,18% | 68,82% |
| 28/07/2027 | 0,00% | 34,50% | 65,50% |
| 15/09/2027 | 0,00% | 54,65% | 45,35% |
| 27/10/2027 | 0,00% | 53,50% | 46,50% |
| 08/12/2027 | 0,00% | 62,93% | 37,07% |
Image: Shutterstock
