According to Bureau of Labor Statistics data, the headline consumer price index rose to 3.8% year over year in April, higher than market expectations of 3.7%. This is up from 3.3% in March, and the highest since mid-2023. The monthly increase was driven by a 3.8% increase in the index for energy that follows a 10.9% increase in March. Core CPI, excluding volatile food and energy prices, came in at 2.8% year over year, slightly above market expectations of 2.7%, but a step up from 2.6% in March.
The ABA Office of the Chief Economist believes that this month’s sustained increase in consumer price inflation reflects the continued pressures stemming from recent energy supply shocks. Persistent upward inflation reinforces expectations that interest rates will remain higher for longer, supporting loan yields but margins will remain pressured as funding costs remain competitive. Higher inflation and uncertainty may continue to weigh on economic growth and loan demand, particularly for interest-sensitive products such as mortgages and commercial real estate. Moreover, as consumers face budgetary pressures from higher energy prices, consumer credit quality could deteriorate.
