Rising housing and energy costs are still impacting inflation the most.
The U.S. Consumer Price Index (CPI) report released by the Bureau of Labor Statistics (BLS) on Wednesday revealed that the inflation rate was 3.4% in April compared to prices a year prior, slightly less than the 3.5% inflation rate recorded in March.
The CPI report assesses how much the prices of food, clothing, shelter, transportation, and other goods and services change over time in 75 cities across the country. The CPI takes 6,000 housing units and 22,000 retailers into account.
The cooling is a step in the right direction towards potentially lower interest rates, per Bloomberg. The price increases were less than economists expected and arrived after three consecutive higher-than-expected CPI reports.
“This was a good report in the context of three hotter-than-expected [CPI] reports, and it makes it look like potentially those were bumps in the road rather than a really stagnant inflation environment,” Tyler Schipper, economics professor at the University of St. Thomas in Minnesota, told CNN Business.
Housing and gas contributed to more than 70% of price growth in April; those two categories combined contributed to more than half of price growth in March.
The cost of food stayed flat: The food category, which increased by 0.1% in March, maintained the same prices in April.
Related: CPI Report: Inflation Rose More Than Expected in March, Driven By Housing and Energy Costs
Gas and Rent Prices Are Rising
Gas prices rose 5.2% in April, before seasonal adjustment, causing energy prices to rise 1.1% overall during the month.
In the past year, gas prices have increased by 1.2% and electricity by 5.1%. At the same time, within the same energy category, natural gas prices have dropped by 1.9% and fuel oil by 0.8%.
In the shelter category, rent rose 0.4% in April as did owners’ equivalent rent.
The report opens the possibility of “a potential rate cut later in the year,” Kathy Jones, Charles Schwab’s chief fixed-income strategist, told Bloomberg. “It will take a few more readings indicating that inflation is coming down for the Fed to act.”
The next CPI report will come out on June 12.