U.S. April CPI Surges to 3.8%, Highest in Three Years, Rekindling Inflation and Dividing Fed Policy Outlook

On May 12, 2026, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index rose 3.8 percent year-over-year in April, the largest increase since 2023 and well above the Federal Reserve's 2 percent target. Energy prices surged 17.9 percent annually, with gasoline prices jumping 28.4 percent, driven primarily by the ongoing U.S.-Iran conflict disrupting oil production and shipping. Core inflation, which excludes volatile food and energy costs, rose 2.8 percent year-over-year, up from 2.6 percent in March, indicating that rising energy costs are gradually spreading into broader sectors of the economy.

Following the data release, U.S. stocks retreated from record highs, with the S&P 500 closing down 0.16 percent and the Nasdaq Composite falling 0.71 percent, while the Dow Jones Industrial Average edged up 0.11 percent. The yield on the 10-year U.S. Treasury note climbed to around 4.45 percent. Market pricing of a potential Federal Reserve rate hike by year-end rose to 31 percent, up from 19 percent a day earlier. On the same day, the U.S. Senate confirmed Kevin Warsh to a 14-year term as Federal Reserve governor, positioning him to succeed Chair Jerome Powell, whose term expires on May 15. Warsh faces a challenging landscape of steering monetary policy with inflation running above 3 percent, as the window for interest rate cuts rapidly narrows.