Headline prices were lifted by a 0.9% increase in food prices, which included the impact of the war in Ukraine on cereal products, the avian flu outbreak on meat prices, and droughts in some parts of the country. Adding to food costs are the labor supply shortage in the transportation sector and extended wait times for commercial vehicles to cross the Southern border at some key crossings. Energy prices dropped during the month, but are headed higher in May on the potential for Europe's Russian oil embargo. Base effects will help annual inflation continue to decelerate in the near term, but that will be limited by the climb in gas prices, supply disruptions tied to lockdowns in China, the tightening in the labor market, and the upside in the shelter category. As price pressures broaden, the Fed will be focused on preventing a de-anchoring of longer-term inflation expectations, and will do so by conducting a string of consecutive 50bps rate hikes.
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