U.S. inflation rose more than expected in April, driven by persistent services inflation and higher food costs tied partly to rising energy prices. The hotter-than-expected consumer price index data added uncertainty around the Federal Reserve’s timeline for potential interest-rate cuts.
BNN Bloomberg spoke with Ian Wyatt, chief economist at Huntington Commercial Bank, about the drivers behind the latest inflation data, the role of labour-market pressures and why U.S. consumers continue to show resilience despite higher gasoline prices.
Key Takeaways
- U.S. headline and core inflation both came in above expectations, with services inflation remaining a key source of price pressure.
- Higher oil and energy costs contributed to rising food prices, particularly in transportation-heavy industries.
- Shelter inflation data was distorted by statistical adjustments tied to the previous U.S. government shutdown.
- Labour-market pressures remain elevated for lower-wage and hourly workers, helping keep services inflation firm.
- U.S. consumer spending has remained resilient so far, including in discretionary categories such as restaurants and airlines.
Read the full transcript below:
ROGER: All right, we are just getting the latest inflation numbers from south of the border. A quick look here: CPI month over month, 0.6 per cent, the same as the survey. Core CPI month over month, 0.4 per cent; the survey was 0.3. And here’s the big one: year over year, 3.8 per cent. The survey was 3.7. Core CPI, 2.8 per cent year over year, while 2.7 was expected. For a little more reaction and in-depth analysis, we turn to Ian Wyatt, chief economist at Huntington Commercial Bank. Ian, thanks very much for joining us this morning.
IAN: Thank you for having me. I appreciate it.
ROGER: Okay, 3.8. You guys were expecting 3.6. What do we know? What’s driving the even bigger number?
IAN: One of the things we’ve been watching for a while is services. Last year, a lot of the conversation was about tariffs in terms of inflation, but in reality, when you looked at what drove inflation last year, it was labour costs. Services were up 0.6 per cent month over month. We also saw a decent jump in food prices as well, up 0.5 per cent. That’s going to be an obvious pass-through from oil and energy costs directly into food. It’s a pretty diesel-heavy industry. Some of that was expected, but yes, it came in a little hotter than we were estimating. There were also some unusual effects in shelter inflation that are worth mentioning.
ROGER: What were some of those?
IAN: Sure. In shelter, what happened basically was that because of the government shutdown back in October, there were some statistical anomalies, and the Bureau of Labor Statistics had to change the way it calculated shelter for the next few months. What they effectively did was pack two months of shelter inflation into one month here. Going forward, that should be corrected. Shelter was actually something we were fairly positive about. Much like north of the border, south of the border as well, we have fairly weak shelter inflation happening, especially if you look at market rent indices, which tend to move before the BLS data does. CoStar is basically at 0.0 per cent year-over-year inflation.
BRIAN: Ian, just thinking about forecasting inflation, economists obviously have lots of time and elaborate models to throw a thousand prices into the blender and build their forecasts from the bottom up. But if you’re a do-it-yourself investor looking for a shortcut, are there things you can point to for context? We had a summer intern last year look at market-implied inflation as measured by the TIPS market, Treasury inflation-protected securities, and also the University of Michigan five-year inflation forecast survey. His work found both have some predictive power, but at different times. Any thoughts on what those surveys or signals are telling you? They’re pretty divergent, with the University of Michigan reading much higher and the bond market much lower.
IAN: Yeah. I always think gasoline is front of mind for people, and yet, in terms of the overall spending basket in the U.S., for almost every household quintile except the top quintile, it was roughly 4 per cent of spending last year. We see that rising to 5 to 6 per cent this year. People talk a lot about gasoline, and I think that really drives survey responses when you ask what they think about inflation. But the reality is that overall services inflation, wage costs and healthcare inflation are much bigger drivers. Healthcare feeds much more into PCE than CPI. That’s actually one of the major distinctions between the Fed’s preferred inflation measure and CPI because indirect healthcare spending through insurance companies doesn’t count in CPI. The other big factor is shelter. For a while, we had really robust shelter inflation, but that has come down a lot, and that has helped. For many rental households, shelter can represent a third of income, while gas prices are closer to 5 per cent.
ROGER: And that’s making the difference now. We’ve heard Trump musing about possibly dropping one of the federal taxes on gas. Would that help at all, or is it a drop in the bucket, so to speak?
IAN: It wouldn’t hurt, certainly. We’ve seen some stimulus effects over the past few months that have probably helped offset some of the pain at the pump for consumers. There were a couple of unusual effects from last year’s tax bill where some of the changes didn’t actually hit until this year because withholdings didn’t change immediately. People ended up getting slightly bigger paycheques starting in January, and they also got bigger refunds because they had higher withholdings last year. Put together, for a typical household, you’re talking about 1 to 2 per cent of income, which is actually very similar to the hit from higher gas prices. That stimulus effect has helped offset the impact of gasoline prices on households.
When we look at consumer data, including Bloomberg Second Measure and other real-time credit card spending metrics, we still see consumers spending at a fairly similar pace for non-gasoline products, including sensitive categories like restaurants and airlines that usually weaken when consumers pull back. We still see a fairly resilient consumer. Lowering the gas tax probably wouldn’t hurt from a stimulus perspective, but at the same time, on the rate side, that kind of stimulus can also push rates higher.
BRIAN: Ian, how do you read the interplay between labour markets and inflation? Thinking about this word “transitory,” which has probably become the Achilles heel of the Federal Reserve post-pandemic, we had tight labour markets, then the Russia-Ukraine war and the oil-price spike, and that created the wage-price spiral. Labour markets seem somewhat looser now. So how are you thinking about this oil shock and how it feeds into wage pressures in today’s environment?
IAN: That’s a good point. I liked the point Powell made that we’ve had all these transitory shocks — COVID-19, the Russia-Ukraine war, tariffs — and now another inflationary shock over the past six years or so. At some point, you have to ask whether transitory shocks are just part of the normal reality we’re living with. They’ve certainly become more common, and I think the bond market has priced some of that in.
On the labour-force side, we see a two-speed labour market. If I talk to companies competing for hourly workers and lower-end wages, they still see a fairly tight market. It’s not as extreme as it was a couple of years ago, but it’s still tight for fast-food workers, warehouse workers and similar jobs. Part of that is because large warehouse employers like Amazon are paying around US$23 an hour on average in many regions, and that’s pushing hourly wages higher.
But if you talk to parents of recent graduates or to recent graduates themselves, they’ll tell you it’s a tough market for college graduates. That lines up with the industries that are hiring. Industries that employ a lot of college graduates are not hiring as aggressively, while lower-end service industries are. Healthcare, for example, has a surprisingly large share of lower-wage jobs tied to support services, food services and home health aides. That’s where a lot of the job growth has been.
We still see that lower-wage labour market as relatively tight, even though turnover has slowed. That’s creating challenges, and I think it’s part of why we’re still seeing food away from home up 3.2 per cent year over year and services inflation up 3.4 per cent year over year. Those numbers partly reflect ongoing wage pressures in that space.
ROGER: All right, we have to wrap it up there, Ian. Thanks, as always, for joining us. Appreciate it.
IAN: Thank you for having me. I really appreciate it, Roger and Brian.
ROGER: Ian Wyatt, chief economist at Huntington Commercial Bank.
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This BNN Bloomberg summary and transcript of the May 12, 2026 interview with Ian Wyatt 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.
