What happened this week
U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices amid the three-month-old war with Iran.
The U.S. and Iran reached an agreement on Thursday to extend their ceasefire pending the approval of President Donald Trump, after the two sides traded blows. The new attacks, while limited, highlighted the fragility of negotiations to turn the tenuous early-April ceasefire into a lasting agreement.
What the numbers show
Surging price pressures are eroding household income, even as the inflation figures for last month were in line with what markets expected.
Gasoline prices have increased more than 50% since the war started at the end of February, and consumers are paying higher prices for other goods and services. They are also tapping into savings, with the saving rate dropping to 2.6% last month.
What’s next
With inflation outpacing wage gains and tax filing season over, consumers may pull back on spending.
As for the war, Trump has repeatedly said the end is close but said on Wednesday he was not yet satisfied by the negotiations and that the U.S. was not discussing easing sanctions, one of Tehran’s demands.
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