The US consumer price index (CPI) rose 0.6% in April 2021, marking the biggest increase in monthly inflation since August 2020. The inflation rate was up from a 0.4% gain in March and was the highest since the 0.8% rise seen in December 2019.
The main drivers of the surge in inflation were increases in the cost of apparel, housing, motor vehicle insurance and transportation. The prices of gasoline, electricity, food and beverages all experienced increases as well.
The US Department of Labor also reported that the overall consumer price index for all urban consumers rose 4.2% over the past 12 months, the largest 12-month increase since 2008. Core CPI, which excludes food and energy, also increased 0.3% in April, compared to an increase of 0.2% in March, and an increase of 3.5% over the past 12 months, the largest year-over-year increase since 2004.
Analysts believe that the jump in prices is due to continuing supply chain issues, which has caused prices to rise faster than normal. In addition, rising demand amid a reopening economy has also contributed to the increase.
It is important to note that this increase in inflation is temporary, and so far has not put any sustained pressure on the Federal Reserve to increase interest rates. However, if the inflationary pressure continues for an extended period, the Federal Reserve could be forced to act.