By Lucia Mutikani

WASHINGTON (Reuters] – U.S. consumer inflation slowed dramatically in April, as gas prices fell to new record levels. Although this suggests that inflation is at an end, the Federal Reserve will continue to keep its foot on the pedal to lower demand.

According to the Labor Department, 0.3% was the most recent consumer price index increase since August 2005. This is the lowest gain in the past three months. This contrasts sharply with the 1.2% monthly increase in CPI for March which represented the biggest advance since September 2005.

However, the slowdown in CPI may be temporary. The largest reason for the decline in monthly inflation was the rise in gasoline prices. This week they were $4.161/gallon after falling below $4 in April. According to the Energy Information Administration

The main driver of the rise in gasoline prices is Russia’s war on Ukraine. This war also drove up the global good price.

Before Moscow’s February 24 invasion of Ukraine, inflation was already a concern due to stretched global supply chains. The COVID-19 pandemic saw economies emerge from it after countries around the world invested huge amounts of money into pandemic relief. Central banks also lowered interest rates.

On Tuesday, President Joe Biden acknowledged that inflation is causing pain for American families. He said that bringing down prices “is my number one domestic priority.”

The Fed increased its policy interest rates by half an percentage point last week. This was the highest increase in 22 years. In March, the U.S. central banking began raising interest rates.

CPI rose 8.3% over the past 12 months. Although it was the first decrease in annual CPI since August last year, this month marked the seventh consecutive month with increases exceeding 6%. CPI grew 8.5% in March. This is the biggest year-on-year increase since December 1981.

Reuters polled economists and forecast consumer prices rising by 8.1% in the year to April.

Although monthly inflation is expected to rise, the annual rate of inflation will be lower as the large increase in last year’s readings fall out. However, it will still exceed the Fed’s 2 percent target for at least 2023.

China’s COVID-19 policy of zero tolerance is seen to put more pressure on the global supply chain, leading to higher prices. Inflation is also high because of strong summer demand and shortages in workers.

Last month saw solid gains in rents and airline fares, as well as new vehicle prices. This helped to boost underlying inflation.

The CPI rose 0.6% in April, after increasing 0.3% in March. In the twelve months ending April, core CPI rose 6.2%. It followed an increase of 6.5% in March, the biggest gain since August 1982.