US inflation hits three-year high in April as Americans’ incomes and purchasing power erode | Today’s news
A key measure of inflation accelerated to its highest level in three years in April, squeezing Americans’ finances. Inflation jumped to 3.8% in April from a year earlier, the Commerce Department said Thursday, up from 3.5% in March and the highest since May 2023. On a monthly basis, prices rose 0.4%, down from a 0.7% jump in March, but still higher than the Federal Reserve’s inflation campaigners would have preferred.
Inflation above the Fed’s target
Thursday’s inflation report also showed that in addition to gasoline, food, clothing and electricity prices were also rising, suggesting that inflation may rise even more firmly. Inflation is well above the Federal Reserve’s 2% target, meaning Fed policymakers may decide to forego any cut in their key short-term interest rate this year. Some officials have suggested that the central bank’s most significant move under new Fed Chairman Kevin Warsh could be to raise rates rather than cut them.
U.S. earnings fell for a third straight month
Thursday’s report showed Americans’ after-tax income, adjusted for inflation, fell for a third straight month, while inflation-adjusted spending barely rose.
Americans’ incomes were unchanged in April from March, in part because farm incomes fell after a major government aid package ended last month. Adjusted for inflation, personal income actually fell by 0.1% last month.
Spending rose 0.5% in April from March, though most of that reflected price increases. Adjusted for inflation, spending rose just 0.1% in April from 0.3% the previous month.
Core inflation rose to 3.3%
Excluding volatile food and energy categories, core inflation rose to 3.3% in April from 3.2% the previous month. It’s the highest core number since October 2023. One positive signal in the report: Core prices rose just 0.2% in April from March, down from 0.3% in the previous month.
US economic growth
The U.S. economy grew at a modest 1.6% annual rate from January to March, according to a separate Commerce Department report Thursday. The country’s gross domestic product – the country’s production of goods and services – rebounded from a lackluster 0.5% growth in the final quarter of 2025, when growth was crippled by a 43-day shutdown of the federal government.
The growth in the first quarter, which covered the first month of the Iran war, was down from the 2% expansion that Commerce had initially reported.
Resilient consumer spending – mostly by higher-income households – and continued investment in AI infrastructure are helping to drive modest growth.
Growth in consumer spending, which accounts for two-thirds of U.S. economic activity, slowed to 1.4% in the first quarter from 1.9% at the end of 2025, down from the 1.6% forecast for the first quarter. But business investment, likely driven by AI spending, grew at a 7% pace.
US gas prices
Gas prices averaged about $4.50 a gallon nationwide for three weeks this month before falling to $4.43 on Thursday, according to the AAA Motor Club. The day before the Iran war broke out, gas averaged $2.98 a gallon.
Earlier on Wednesday, Treasury Secretary Scott Bessent said the higher prices would be “transitional,” reviving the unfortunate term used by former Fed Chairman Jerome Powell to describe the spike in inflation in 2021-22 that has become a major political sticking point for Trump in his campaign for a second term.
