WASHINGTON — Consumer prices in the United States rose again in April, and measures of underlying inflation stayed high, a sign that further declines in inflation are likely to be slow and bumpy.

N.C. State economist Dr. Mike Walden agrees and points out that consumers as well as business leaders have problems to be concerned about.

“The headline will be ‘annual inflation rate drops to 4.9%.”’ Indeed, this is good news as we have now seen substantial progress in moderating the inflation rate from its high of 9.1% (year over year) last summer,” Walden tells WRAL TechWire.

Prices increased 0.4% from March to April, the government said Wednesday, up from a 0.1% rise from February to March. Compared with a year earlier, prices climbed 4.9%, down slightly from March’s year-over-year increase.

There’s a big caveat, however.

‘Recession bell continues to ring … just got louder’ warns NC State economist in new report

“But beneath the headline are some worrisome factors,” says Walden, who also is worried about the fight against inflation through higher interest rates from the Federal Reserve will lead to  a recession.

“Gas prices rose significantly in April, and are likely to move even higher during the busy summer driving season.  Also, the inflation rate from March to April was a robust 0.4%, much higher than the monthly rate for February to March.  The monthly price rises drive home the point that prices – on average – are still rising.

“Inflation is still with us – and will continue to be with us – but it will just be more moderate. Indeed, the Federal Reserve’s goal is an annual 2% price in average prices.”

Forget prices of the past, he warns.

“[I]t is good for consumers to remember that most prices will not return to pre-pandemic levels.   Instead, the goal is to lower the rate of price increases.  In doing so, households will have a better chance of seeing their earnings rise enough to pay the higher prices,” Walden explains. “Bottom line – price increase are still a problem for most consumers.”

Still, the data offered some signs that inflation is continuing to cool. Airline fares dropped 2.6% in April, and hotel prices plunged 3% after four straight monthly increases.

Excluding volatile energy and food costs, core prices rose 0.4% from March to April, the same as from February to March. It was the fifth straight month that core prices have risen at least 0.4%. Core prices are regarded as a better gauge of longer-term inflation trends, and monthly increases at that pace are far above the Fed’s 2% annual target.

‘Recession bell continues to ring … just got louder’ warns NC State economist in new report

Compared with a year ago, core inflation rose 5.5%, just below a year-over-year increase of 5.6% in March.

The Fed is paying particular attention to a measure of services inflation that covers such items as dining out, hotel stays and entertainment and has remained chronically high for much of the past year. This measure, which excludes energy services and housing, rose just 0.1% from March to April and 5.2% compared with a year ago. It had exceeded 6% a month ago.

Last week, the Fed signaled that it might pause its rate increases, after imposing 10 straight hikes, so that it could take time to assess how higher borrowing costs have affected the economy. The full economic impact of the hikes, though, might not become evident for months.

For more than two years, high inflation has been a significant burden for America’s consumers, a threat to the economy and a frustrating challenge for the Fed. The central bank has raised its key interest rate by a substantial 5 percentage points since March 2022 to try to drive inflation back down to its 2% target.

Besides making borrowing far more expensive for consumers and businesses, those higher rates have contributed to the collapse of three large banks in the past two months and to a likely pullback in bank lending. The result could be a further weakening of the economy.

Even more ominously, the government’s debt ceiling may be breached by early June, and Republicans in Congress are refusing to raise the cap unless President Joe Biden and congressional Democrats agree to sharp spending cuts. If the debt ceiling isn’t raised in time, the nation would default on its debt, a scenario that could ignite a global economic crisis. When they met last week, the Fed’s policymakers agreed to raise their benchmark rate by a quarter-point, to about 5.1% — the highest level in 16 years. The Fed’s rate hikes, which are intended to cool spending, growth and inflation, have led to higher costs for mortgages, auto loans and credit card and business borrowing.

Most economists think the rate hikes will, over time, have their intended effect. Yet most also worry that the hikes will weaken the economy so much as