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US prices of used cars will drop again soon

This time, however, it isn’t just used cars dominating the inflation reading. Declines in new car prices and discounts on various services, such as transportation and medical care, helped even out the CPI data and dial annual inflation down from 5% in March to 4.9% in April.

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As new car purchases rebound and consumers spend their income tax refunds, the used car market is likely to cool back down again, wrote Skanda Amarnath, an economist at Employ America, a labor advocacy group.

Core inflation—an important measure that strips out volatile energy and food prices and often determines the future of inflation—without used cars and auto insurance would have risen by a mere 0.2% (instead of the 0.4% expected by economists), Dean Baker, an economist who co-founded the Center for Economic Policy Research, said on Twitter.

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