Key inflation gauge worsens as Americans' income and spending power erodes

WASHINGTON (AP) — A key inflation gauge accelerated in April to the highest level in three years, squeezing Americans’ finances and creating political challenges for President Trump and congressional Republicans with midterm elections just five months away.

Inflation jumped to 3.8% in April compared with a year ago, the Commerce Department said Thursday, up from 3.5% in March and the highest since May 2023. On a monthly basis, prices rose 0.4%, down from the 0.7% jump in March but still higher than the inflation-fighters at the Federal Reserve would prefer.

Thursday’s inflation report also showed that in addition to gasoline, prices for groceries, clothing and electricity are also on the rise, indicating that inflation may be growing more entrenched. Inflation is notably above the Federal Reserve’s target of 2%, which means Fed policymakers may decide to forego any cuts to their key short-term interest rate this year. Some officials have signaled that the central bank’s most substantial move under new Fed Chair Kevin Warsh could be a rate hike, rather than a cut.