What inflation easing to 3.4 percent means for YOU: How rising prices affects your credit card rate, house prices and 401(K)

The rate of annual inflation eased slightly to 3.4 percent in April, down from 3.5 percent in March.

Prices continue to be driven up by the cost of gasoline and shelter which, combined, contributed to over 70 percent of gains to the Consumer Price Index (CPI) in the last 12 months.

So-called 'core prices,' which exclude volatile food and energy costs, climbed 3.6 percent in the year to April - the lowest increase since the same month in 2021. 

The figures, released by the Bureau of Labor Statistics Tuesday morning, offer slight relief after three consecutive CPI releases suggested price pressures are continuing to strain the US economy. 

Stocks ticked upwards slightly following the report. The S&P 500 was up 0.48 percent at 9AM Eastern Time (ET) while the Dow Jones Industrial Average had risen 0.32 percent.

Inflation must cool in order for the Federal Reserve to cut interest rates, which are currently at a 23-year-high of between 5.25 and 5.5 percent.

Higher rates are intended to reign in consumer spending by lowering demand thereby causing prices to fall.

The Fed has a clear target of bringing the annual rate of inflation to 2 percent.

At the start of the year, economists had predicted officials would slash rates up to four times.

But consistently hotter-than-expected inflation readings have thrown that plan into doubt.

Some 96.9 percent of investors now anticipate the Fed will keep rates unchanged during their next meeting on June 12, according to the CME FedWatch Tool.

More promisingly, around 90 percent still anticipate at least one rate cut by the end of the year.

Fed Chair Jerome Powell said during a discussion in Amsterdam yesterday: 'We did not expect this to be a smooth road.'

He added officials need to 'be patient and let restrictive policy do its work.'

Brent Kenwell, US investment analyst at eToro, said: The not-too-hot report should boost investor confidence.

'After a series of higher-than-expected inflation reports to start the year, worries of reflation had surfaced as investor expectations for rate cuts continued to fade.'

The Fed's benchmark funds rate has a knock-on effect on the interest offered to households on their credit cards, mortgages and personal loans. 

The rate offered on a 30-year fixed-rate mortgage is hovering at 7.09 percent, according to Government-backed lender Freddie Mac.

Meanwhile the average interest on a credit card is 20.66 percent, according to figures from Bankrate.

Credit cards are one of the few borrowing vehicles to offer a variable rate - meaning they change in-line with the Fed's funds rate.

The cost of auto-lending has also shot up. The average rate on new car loans in March was 7.4 percent, data from Edmunds.com shows.