The U.S. Consumer Price Index (CPI) showed a significant drop in April, falling to 2.3% – the lowest level since 2021. This unexpected decline suggests potential for lower interest rates from the Federal Reserve later this year. The report reveals that shelter costs were the primary driver of inflation increase, accounting for over half of the monthly CPI gain. Energy prices also contributed to a rise in prices but at a moderate rate with an increase of 0.7%, largely due to higher natural gas and electricity costs. Notably, food prices fell overall by 0.1% with a significant drop of 0.4% in grocery items. Core inflation (excluding food and energy) also rose slightly, reaching 2.8% year-over-year, indicating sustained inflationary pressure. However, the report offers hope as several categories saw price declines including airfare, used vehicles, apparel, and communication services, pointing towards easing cost pressures in discretionary and durable goods. This positive inflation trend marks a turning point for economists and strengthens market optimism about a more dovish Federal Reserve stance, especially amidst growing pressure to boost economic growth.