The inflation rate barely budged in April, dropping to 4.9% year-over-year from 5% in March, according to Labor Bureau data published Wednesday.
That's well below a June 2022 peak of 9.1%, as measured by the consumer price index, which tracks the cost of goods and services that Americans commonly buy.
April's inflation rate is largely due to rising energy and shelter prices, which account for nearly half of the total cost of items tracked by the index.
Energy prices increased 0.6% in April after posting a 3.5% decline in March. Shelter prices rose by 0.4% after gains of 0.6% in March.
While it's widely expected that the inflation rate will continue to decline throughout 2023, it's not yet clear when it might drop to the Federal Reserve's target rate of 2%, if at all.
When will inflation get back down to 2%?
Despite nearly stalling in April, inflation is expected to decline to 4.41% in May, according to the Cleveland Fed's Inflation Nowcast modeling. Similarly, inflation is expected to ease back down to 2.6% by 2024, according to 37 forecasters surveyed by the Federal Reserve Bank of Philadelphia.
These forecasts largely reflect a slowing economy and the effects of ongoing interest rate hikes that are making borrowing more expensive, which discourages spending.
It's also worth noting that shelter costs as measured by the CPI tend to lag by a few months, so they don't yet reflect the price declines of the past few months.
One mitigating factor to these forecasts is wage growth, which has been outpacing the rate of inflation. Increased wages encourage consumer spending, which can drive up prices.
"Until labor market conditions cool, a 2% inflation pace will remain difficult to reach," says Kurt Rankin, senior economist at PNC Financial Services Group. PNC expects the CPI's measure of inflation to "approach 3%" by 2024, he adds.
Even with these forecasts, "I don't think consumers are in a position to proclaim victory over inflation," says Mark Hamrick, a senior economic analyst at Bankrate, citing remaining supply chain bottlenecks and a robust labor market.
That said, people shouldn't expect a sudden surge in inflation similar to what we saw in 2022, either, barring unforeseen events, he says.
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