Inflation rebounds sharply! US April CPI rose 3.8% year-on-year, higher than expected; Middle East conflict pushes up oil prices, adding uncertainty to Fed rate cuts.

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The inflation nightmare is far from over! The US April CPI year-on-year growth rate rebounded sharply to 3.8%, with energy and housing costs emerging as the two major culprits. Driven by rising oil prices due to the Middle East conflict, the energy index surged by nearly 18% year-on-year, and the core CPI month-on-month growth rate saw a staggering doubling. This hotter-than-expected report has dealt a heavy blow to market optimism regarding a summer rate cut by the Fed, and the chilling wind of "higher for longer" interest rates threatens to hit the cryptocurrency and US stock markets once again. (Previous coverage: April CPI alert tonight! Expectations of 3.7% mark a three-year high; Trump unable to contain inflation) (Background supplement: US April non-farm payrolls added a better-than-expected 115,000 jobs! Unemployment rate steady at 4.3%, wage inflation cools; are Fed rate cut expectations warming up?) The Fed's efforts to tame inflation appear to be facing strong resistance from geopolitical tensions and economic resilience. The US Bureau of Labor Statistics (BLS) officially released the Consumer Price Index (CPI) for April 2026 on the morning of the 12th (Eastern Time). The report shows that US inflationary pressure rebounded significantly in April, with the overall CPI year-on-year growth reaching 3.8%, a sharp rise from 3.3% in March, and higher than the market's expected range of 3.6% to 3.8%; the month-on-month growth rate was recorded at 0.6%. This data reflects that, due to soaring energy prices caused by the ongoing Middle East conflict and the persistent strength of rental costs, the US inflation rate is once again deviating from the Fed's 2% target trajectory. The report points out that energy prices were the core factor behind the blowout April inflation data. The energy index rose 3.8% in a single month, contributing more than 40% of the overall monthly CPI increase. Specific breakdown data shows: - Gasoline index: A significant monthly increase of 5.4%, with a cumulative increase of a staggering 28.4% over the past 12 months. - Fuel and electricity: Fuel rose 5.8% month-on-month, and electricity rose 2.1%. - Overall energy year-on-year growth rate: Reached 17.9%. Market analysts generally believe that the blockade of the Strait of Hormuz and regional warfare caused by the Middle East conflict are the key reasons driving up global oil prices and directly transmitting them to US domestic inflation. In addition to energy, the "core CPI," which excludes food and energy, was equally unsettling. The core CPI month-on-month growth rate in April doubled from 0.2% in the previous two months to 0.4%, while the year-on-year growth rate rose from 2.6% to 2.8%. The pressure of core inflation mainly stems from the Shelter Index, which rose 0.6% month-on-month in April (both owners' equivalent rent and rent rose by 0.5%), contributing to the main increase in core inflation. Furthermore, airline fares (+2.8%), household furnishings (+0.7%), and personal care (+0.7%) also recorded significant increases, indicating that inflationary pressure has permeated the service sector and various durable goods. The food index also turned from flat in March to a 0.5% monthly increase in April (3.2% year-on-year). Among them, the "food at home" index rose 0.7%, with the most notable increases in meat, poultry, fish, and eggs at 1.3%, particularly beef prices which surged 2.7%; the fruits and vegetables index also rose by 1.8%. This "overheated" CPI report undoubtedly casts a shadow over the long-awaited Fed rate cut path. With core inflation showing strong stickiness and energy prices constrained by geopolitics, Fed officials are likely to maintain a more hawkish stance in the upcoming FOMC meeting. The market is currently closely watching the new Fed Chair Warsh, who will take office this Thursday. Against the backdrop of rebounding inflation, whether the dot plot under Warsh's leadership will significantly reduce the number of rate cuts for the year has become the biggest "black swan" feared by the financial market.

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