Consumer Price Index April 2026

Inflation heats up as Middle East cost pressures broaden

Headline Consumer Price Index (CPI) rose more than expected in April, up 0.6% month after month (m/m), after an outsized 0.9% gain in March. Headline inflation surged 0.5 percentage points (ppt) to 3.8% year over year (y/y) with energy and food price inflation leading the way, and core inflation witnessing early passthrough from higher airfare inflation.

Core CPI rose 0.4% m/m, in line with expectations, with inflation rising 0.2ppt to 2.8% y/y. Part of the inflation pickup is a correction for the missed data collection in October due to the government shutdown with shelter costs rising 0.6% m/m on a 0.5% increase for both rent and owners’ equivalent rent. While goods prices were flat on the month — a tentative sign that tariff-induced pressures may have peaked — services prices revealed early passthrough from the Middle East conflict with airfare rising strongly.  

The longer the Middle East conflict lasts, the more severe and broader inflationary pressures will become. In the coming months, we anticipate higher fertilizer prices will lead to higher food price inflation while higher transportation and production costs, stemming from higher energy and input costs, will be passed on to goods and services prices. We anticipate CPI inflation could surpass 4% in May while core inflation approaches 3%. Risks of higher and more persistent inflation remain salient.

From a policy perspective, this report will reinforce most Fed policymakers’ hawkish leaning, especially with the latest employment report pointing to low unemployment and moderate job growth. While policymakers are likely to look through some of the April strength, a sustained run of elevated inflation prints would keep the risk of tighter policy on the table. As such, we now anticipate dual-sided wording in the June Federal Open Market Committee (FOMC) statement indicating rate hikes could be warranted should inflation prove more persistent than anticipated.

In the details:

• Energy prices rose 3.8% m/m in April, following the largest monthly increase in over two decades in March. Gasoline prices grew 5.4% after a record increase in March, while fuel oil prices rose 5.8%. At current commodity price levels, energy components are likely to remain elevated in the near term.

• Energy services prices firmed 1.6% m/m with electricity prices rising 2.1%, while utility piped gas prices declined 0.1%.

• Food prices increased 0.5% on the month, driven by a 0.7% rise in grocery prices and a more moderate 0.2% increase in restaurant prices. Five of the six major grocery categories posted gains in April, led by meats (+1.3%), including beef at (+2.7%), fruits and vegetables (+1.8%) and nonalcoholic beverages (+1.1%). Dairy prices rose 0.8%, while cereals and bakery products edged up 0.1%. Looking ahead, higher fertilizer costs are expected to push crop prices higher, feeding into broader food inflation. 

• Core CPI increased 0.4% m/m, largely driven by a robust increase in primary rents and owners’ equivalent rent. However, part of the strength in shelter costs reflects the unwinding of earlier statistical distortions: the government shutdown created a data collection gap in October last year, leading the Bureau of Labor Statistics to assume no rent growth for that month.

• Core goods prices were essentially flat, rising just 0.03% on the month. Declines in household furnishings and supplies reflect some continued easing in goods inflation as tariff pressures moderate. Apparel prices rose 0.6%, supported by seasonal demand amid warm weather. Used vehicle prices were unchanged, and new vehicle prices declined 0.2%.

• Shelter costs rose 0.6% m/m, with both rent and owners’ equivalent rent increasing 0.5%. A temporary statistical distortion tied to last fall’s government shutdown lifted shelter CPI in April. However, this was a one‑off effect and does not signal underlying momentum as housing inflation is likely to remain on a gradual cooling path. 

• Airfares increased 2.8% m/m, while car rental prices fell 3.7%. On a year-over-year basis, airfares are now up 21%, while car rental prices are down 0.1%. Looking ahead, lingering geopolitical tensions in the Middle East are likely to add further upward pressure through higher fuel costs, which will feed through into transportation prices in the coming months.

• Medical care services prices were unchanged for a second consecutive month. A 0.4% decline in health insurance costs offset a 0.2% increase in professional medical services, while hospital prices fell 0.3%.

The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.