U.S. inflation accelerated to 3.8 per cent in April, marking the fastest annual pace since 2023 as higher gasoline, grocery and shelter costs continued to pressure consumers. Economists are also increasingly watching technology-related inflation as semiconductor and software prices rise sharply.
BNN Bloomberg spoke with David Doyle, head of economics at Macquarie Group, about the impact of surging energy prices, emerging tech inflation pressures and what the latest CPI data could mean for future Federal Reserve rate decisions.
Key Takeaways
- U.S. consumer prices rose 3.8 per cent year-over-year in April, the fastest pace of inflation since 2023.
- Higher gasoline prices tied to Middle East tensions accounted for roughly one-third of the monthly increase in headline inflation.
- Technology-related inflation is emerging as a growing concern, with software, semiconductor and computer-related prices rising sharply after years of low inflation.
- Shelter inflation moved higher in April, though economists say part of the increase reflected temporary distortions tied to rent data collection following the 2025 government shutdown.
- Strong inflation and resilient U.S. labour market data are increasing expectations that the Federal Reserve could delay rate cuts or potentially raise rates again.
Read the full transcript below:
LINDSAY: U.S. inflation was up 3.8 per cent in April as energy prices remain high as a result of the conflict involving Iran, while grocery prices are also rising. The increase marks the fastest pace of inflation since 2023. Joining us now is David Doyle, head of economics at Macquarie Group. Great to have you with us. Thanks so much.
DAVID: Thanks for having me.
LINDSAY: The U.S. inflation numbers we’re seeing today appear to be driven primarily by higher energy prices related to the conflict. Can you give us more insight into how much those higher energy prices affected inflation?
DAVID: Yeah. This has been one of, if not the largest, gasoline price spikes we’ve seen historically in terms of the speed of the increase over the past two months. On a non-seasonally adjusted basis, you had a record gain, and that data goes back to 1935. That provides some context around the impulse being driven here.
In the April data, gasoline prices were up 5.4 per cent month-over-month on a seasonally adjusted basis. That contributed about one-third, or 0.2 percentage points, of the 0.6 per cent monthly increase in headline CPI. Energy was clearly a major driver.
What we’re waiting for more evidence of now is whether higher energy and oil prices begin feeding further into the core inflation numbers. We’re seeing some early signs of that already, and we’ll be watching closely in the months ahead.
LINDSAY: Besides energy, what other categories saw the most inflation last month?
DAVID: One of the under-told stories of 2026 is tech-related inflation. It doesn’t have a huge weighting in CPI or core CPI, but prices for things like computer software, computers and chips have been skyrocketing over the past six months.
Computer software and accessories were up about five per cent month-over-month and 14 per cent year-over-year. That’s coming after several decades of disinflation or even deflation in tech.
We’re starting to see that feed through. It should have more impact on the core PCE price index that we’ll get later this month.
You also saw an increase in shelter inflation. Owners’ equivalent rent and actual rents both rose, but that was more related to measurement distortions tied to the government shutdown in October 2025, so I would describe that more as a one-off.
What concerns us more is what’s happening in tech. There’s no evidence of that slowing, particularly given the capital expenditure plans we’re seeing from companies tied to artificial intelligence.
LINDSAY: Many experts are warning fertilizer prices could become a major driver of food inflation in the coming months. Did you see evidence of that in the April numbers, or is that something you’re watching ahead?
DAVID: That’s something we’re watching for in the months ahead. You’re right — there are broader supply constraints coming out of the Middle East conflict beyond just oil and energy. Fertilizers are one example, so we should keep an eye on food inflation going forward.
There are also other commodities, even helium, which is needed for semiconductor production. A lot of that supply comes out of the Middle East, so that could further exacerbate the tech inflation story I mentioned earlier.
Overall, the inflation story right now is one of concern. I would say the risks are tilted to the upside relative to where we are now. Of course, all eyes remain on the conflict in the Middle East and where it goes from here.
LINDSAY: Was there any positive news in today’s report? Any signs that some prices are starting to ease or that something is becoming more affordable?
DAVID: If you wanted to point to one positive development, it’s that tariff-related inflation in the U.S. appears to largely be in the rear-view mirror.
At Macquarie, we’ve discussed this in recent reports. Some studies released by the Federal Reserve over the past month suggest that, at a detailed category level, most of the inflation impact from tariffs already imposed has likely passed through.
One of the indicators we watch is core goods inflation, excluding used cars and trucks, and both of those measures were flat month-over-month in April. That suggests tariff-related inflation is probably in the later innings, if not largely complete.
The new concern, though, is that oil and energy are major inputs into core goods, so there is potential for another inflationary leg ahead tied to higher fuel costs. But at least this month’s data supports the idea that tariff-related inflation pressures are easing.
LINDSAY: Inflation is ticking higher, though. How do you think this latest report will influence the Federal Reserve’s next rate decision?
DAVID: I think you already saw at the Fed’s most recent meeting that there were a number of officials on the fence about whether to maintain guidance suggesting the next move could still be a rate cut.
There were three dissents related to that issue, and Chair Jerome Powell indicated during his press conference that there was a healthy debate around it.
By the June meeting — and we could potentially have a new Fed chair by then — I suspect the Fed will likely withdraw that guidance and move toward a more neutral posture.
Markets are already pricing that in. At Macquarie, we’ve felt for some time that the risks were tilted more toward a rate hike. Our baseline view remains that you’ll likely get a couple of hikes in early 2027.
But if inflation and labour market data continue trending the way they have over the past few months, it’s possible rate hikes could come even sooner, potentially later this year.
LINDSAY: That’s what I was going to ask about. We have higher inflation data today, but last week we also saw relatively strong labour market numbers in the U.S. How do you weigh all of that together?
DAVID: I think it’s all pointing in the same direction. Earlier this year, markets were talking about more Fed cuts because there were concerns the labour market was deteriorating.
There are still some mixed signals in the labour data, but overall, when you look at initial jobless claims, continuing claims and non-farm payroll gains, the broader picture suggests the labour market is strengthening.
Over the next six to nine months, we think the unemployment rate could move lower from the current 4.3 per cent and potentially approach four per cent by year-end.
When you combine that with inflation that remains elevated and could move even higher — especially with tech-related categories accelerating — it argues in favour of higher interest rates. Whether that comes later this year or in early 2027 remains to be seen, but we believe the next move from the Fed is more likely to be a hike.
LINDSAY: Looking ahead, you mentioned several CPI categories you’ll be watching closely — tech, energy, shelter and food inflation. Is there one that stands out above the rest?
DAVID: For me, it’s tech inflation. I still think it’s an under-told and under-emphasized story.
Tech feeds into almost everything — cars, electronics, appliances. Think about how many products rely on semiconductors. Those prices are skyrocketing after decades of extremely low inflation or outright deflation in tech.
That’s a major shift, and it’s the area I’ll be watching most closely going forward.
LINDSAY: David Doyle, head of economics at Macquarie Group, thanks very much for your time today.
---
This BNN Bloomberg summary and transcript of the May 12, 2026 interview with David Doyle are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
