US inflation eases to 4.9% in April as cost of food stays unchanged

Prices rose on an annual basis, slightly lower than 5 per cent forecast

Customers at a shop in San Rafael, California. US inflation cooled in April. AFP

Food prices in the US last month were unchanged as inflation slightly cooled, although still at a level too high for the Federal Reserve's long-term goal.

US inflation rose 0.4 per cent in April, after advancing 0.1 per cent in March, data released by the Labour Department on Wednesday showed. Prices rose by 4.9 per cent on an annual basis, slightly lower than FactSet's 5 per cent forecast.

Core CPI — which excludes food and energy — rose 0.4 per cent on a seasonally adjusted basis and 5.5 per cent year on year.

The rise in goods last month was primarily driven by shelter costs, followed by the index for used vehicles and petrol. The food index was unchanged.

In a statement, White House Press Secretary Karine Jean-Pierre said the latest food data provides "some welcome breathing room for families", while noting that inflation is still too high.

Wednesday's report also gives the Fed some breathing room on how it will address interest rates when it meets again next month.

After raising interest rates to the target range of 5 per cent and 5.25 per cent last week, the Fed suggested that it might pause further rate increases.

Wednesday's data from the Labour Department would complicate those plans, however, with inflation still running above the Fed's 2 per cent goal.

The Personal Consumption Expenditures Price Index, the Fed's preferred inflation metric, will be released later this month.

Wednesday's inflation from the Labour Department follows a report last week that showed a solid increase in jobs and wages, as well as the US unemployment rate falling back to a historic low of 3.4 per cent.

Price pressures and a tight labour force continue to pose problems for the Fed as it looks to suppress inflation, which peaked at 9.1 per cent last summer.

With the economy still adding jobs at a robust pace and inflation still elevated, the Fed may not cut interest rates this year as traders anticipate.

Stock futures jumped after the data was released. Dow Futures gained 165 points, or 0.48 per cent. S&P Futures and Nasdaq Futures rose 0.73 per cent and 0.8 per cent.