April inflation in the United States uncomfortably surprised investors and analysts alike. The consumer price index was up 0.8 percent year-on-month, its highest reading since June 2009.
Also, the year-on-year inflation rate hit its highest level since the financial crisis. In April, prices in the US soared 4.2 per cent compared with April last year. This high inflation was last experienced by the United States in September 2008. Used cars, for example, were significantly healthier within individual items, by more than ten per cent. That’s the most since 1953, when that statistic began to be tracked. The increase in used prices thus contributed from one third to the overall inflation result.
Shares reacted negatively to the surprising numbers on the New York Stock Exchange. The main S&P 500 index lost more than two percent. The Dow Jones weakened by just under two percent and the Nasdaq technology index plunged 2.67 percent. Investors are clearly asking the question of how the Federal Reserve will respond to the inflationary surprise. For the part of his boss, Jerome Powell, there has been repeated assurances that a higher rate of inflation is only a transitional episode, and that the Fed will continue to support the economy. But that was in a situation where the annual inflation rate in the US was around 2.5 per cent.
