According to data released by the Bureau of Labor Statistics on Wednesday, the annual rate of inflation in the US stood at 4.9% in April, lower than consensus expectations of 5.0% and marking the slowest pace in two years.

However, the persistent high prices of essential consumption categories such as food and shelter, which saw price growth exceed the headline rate at 7.7% and 8.1% respectively, indicate the persistence of broad-based price pressure in the US economy.

The recent slowdown in the inflation rate in the US has largely been driven by energy prices, with falling wholesale prices reducing upward pressure on inflation from household bills. While energy’s contribution to April’s inflation rate was negative with prices down 5.1% YoY, some energy subcategories continued to see positive annual price growth. Electricity prices were up by 8.4% on the year in April, close to twice the headline rate of inflation.

The Fed has already raised its base interest rates to its highest level in 16 years last week, and while it signaled that it may be done with its current tightening cycle, the central bank warned that recent banking turmoil and subsequent developments in the sector could result in a credit crunch that could slow economic activity and act as a substitute for further rate rises.

The data suggest the likelihood of interest rates staying in restrictive territory for some time, with Cebr currently expecting the US economy to grow by just 0.8% in 2023, the weakest annual growth performance since 2009.