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Special Report

Inflation Research Brief

May 2023

Tighter Credit Tempers Consumer Price
Pressures, but Also Curtails Lending

Inflation descending at a more subdued pace. Annual growth in the headline consumer price index (CPI) slowed to 4.9 percent in April, marking the 10th month in a row that this metric has decelerated since the Federal Reserve began tightening policy in the current cycle. Increases in the cost of borrowing have chipped away at household demand for major purchases, including for homes and new vehicles, which are often financed. The price index for shelter increased by 0.4 percent in April, the smallest rise since January 2022, while the cost of new motor vehicles fell by 0.2 percent. Nevertheless, OPEC’s recent oil production cuts pushed the cost of gasoline up by 3.0 percent during that month. This abrupt rise, paired with sticky, higher prices for a number of services, minimized the cooling of headline inflation, signaling that ongoing efforts to reduce the inflation rate to the Fed’s 2 percent target may be hitting a snag. 

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