The U.S. inflation rate experienced an unexpected dip in April, landing at 1.8%. This figure took analysts by surprise, as a Dow Jones survey had predicted inflation would hold steady at 2.4%. A significant factor contributing to this slowdown was the price of gasoline, which plummeted by 11.8% year-on-year.

Fed Holds Steady Amid Inflation Concerns

Despite the decrease, inflation remains above the U.S. Federal Reserve’s (Fed) target of 2%. In April, the Fed opted to keep its benchmark interest rate unchanged, remaining in a range of 4.25% to 4.50%. This decision came despite repeated calls from then-President Donald Trump to lower interest rates.

previous Rate Cuts and Current Stance

In September of the previous year, the Fed initiated a series of interest rate cuts to bolster the domestic economy in response to declining inflation.The basic rate was reduced three times, totaling a one percentage point decrease. Though, the Fed has maintained stable interest rates this year, partly due to uncertainties surrounding the potential impact of Trump’s trade policies on both inflation and overall economic growth.

Economists Anticipate Future Inflation Increase

According to Reuters, economists still anticipate an increase in inflation, even though it may not be as considerable as previously projected before the U.S. and China reached a provisional agreement to reduce tariffs. Economists beleive this agreement also mitigates the risk of an economic recession in the U.S.

Inflation is likely to increase to a lesser extent. Its peak should be around 3.4 percent in the fourth quarter rather of previously expected four percent.

Kathy Bostjancic, Economist at Nationwide