Kiplinger Inflation Outlook: Inflation Eases a Bit for the First Time This Year

Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.

Inflation eased slightly in April — the first time this year that has happened. Overall inflation edged down to 3.4% and slipped to 3.6% when you exclude food and energy costs. Inflation in services, a Federal Reserve focus, slowed modestly, helped by flat costs of motor vehicle repairs. Those prices had previously been surging at a 7.6% annual rate. Medical care inflation also eased. The rise in the cost of shelter, a large component of the Consumer Price Index report, slowed only slightly, but it’s still a move in the right direction. Airfares declined. The fly in the ointment was that car insurance premiums are still rising rapidly.

Goods prices, aside from food and energy, declined for the second month, and are down 1.3% over the past year. Prices of new and used vehicles decreased for the third month in a row. Household furnishings prices dropped for the eighth consecutive month. Prices of groceries dipped a bit, the third consecutive month of no increase. They are now up only 1.1% from a year ago. Gasoline prices rose strongly for the third straight month, but available data on May gas prices indicate a flattening for next month’s report. 

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

April’s small progress on inflation means a slim chance the Federal Reserve could cut interest rates at its July 31 meeting, but the odds still favor a first cut at its November 7 meeting, after the election. The Fed is probably hoping that it will be able to cut in July, because then it could follow a pattern of cutting at every other meeting, which would avoid having to cut at its September 18 meeting, during the height of the presidential campaign.

Inflation is likely to be on a slight downward trend this year. We expect that smaller increases in rents will result in a lower inflation rate for shelter costs. This hasn’t shown up much in the broad inflation reports yet, but it should in the near future. Analysts will be focusing on monthly increases in prices since annual inflation numbers for the rest of this year are not likely to dip much below the current rate of 3.4%. That is the result of the relatively soft inflation that took place in the second half of 2023, which will make year-over-year comparisons in the upcoming CPI reports seem like little progress is being made. 

Related content

• Rising Prices: Which goods and services are driving inflation?
• Kiplinger's Economic Outlooks
• When is the next Fed meeting
• How inflation impacts your taxes