3.8% Inflation? Yikes! Here's What It Actually Means
The April inflation report dropped this morning. The headline: 3.8% — the highest reading in about three years. If you saw that number and felt a little uneasy, that’s fair. But before you assume it means mortgage rates are headed higher and staying there, let me give you a little more context.
Just a quick reminder: These articles I share here are researched and written by me! As part of my commitment to ongoing support for my clients and partners, I write these articles to help them understand what’s really happening in the markets, beyond the headlines and soundbites.
Not all inflation is created equal, and that’s important to know.
There’s inflation that’s baked into the economy — rising wages, climbing rents, services getting more expensive across the board. That kind is stubborn. It takes a long time to fix, and it makes mortgage rates go up (and stay up).
Then there’s inflation caused by a single external event — like, say, a war in the Middle East that caused massive disruption to the global oil markets and sent gas prices through the roof.
| Energy | ~43% |
| Shelter | ~28% |
| Food | ~15% |
| Everything else | ~14% |
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The Stubborn Kind
Wages rising fast. Rents climbing. Services across the board getting more expensive. Takes years to fix. The Fed has to act aggressively — and rates go up and stay up. |
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What We Have Now
One external shock — an oil supply disruption from a conflict overseas — pushing energy costs higher. Can cool quickly once the underlying event changes. |
That’s what we’re dealing with right now. Energy alone made up more than 40% of April’s CPI (Consumer Price Index) increase. Strip that out, and the underlying inflation picture is actually pretty calm. Rents are slowing. Used car prices are falling. Core inflation — the number the Fed watches most closely — has been holding steady.
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Headline CPI
3.8%
Highest since May 2023 — driven by energy
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Core CPI (excludes food & energy)
2.8%
The Fed’s preferred read — holding steady
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Shelter Inflation
3.0%
Slowing — down from recent highs
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But that doesn’t mean we’re out of the woods. If oil prices stay elevated all summer, those costs eventually spread. We’ll be watching closely.
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THE BOTTOM LINE
This number, on its own, is not a reason to panic. It IS a reason to stay informed — and to talk to someone who’s paying attention. A 3.8% reading driven by a war overseas is a very different problem than a 3.8% reading driven by an overheated economy. Right now, the evidence points toward the first. That can change. But it hasn’t yet.
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If this was helpful, pass it along — and if you ever have questions about your mortgage or the market, you know where to find me.