After a warming streak in inflation that started in 2024, the Consumer Price Index finally provided relief in April. Why it matters: In a way, the good news is what Wednesday’s report doesn’t say. The April waiting period helps allay fears that inflation will rise. But there is no conclusive evidence that price pressures will return to the lows in 2023, and Fed officials will want to see more evidence of currency damage before cutting interest rates.
What they say: “The first surprise we will see in the depreciation of the foreign currency since the beginning of the year will be the concern that the foreign exchange will rise again.” written.
By the numbers: In the 12 months to April, CPI increased by 3.4%, a small increase from 3.5% in the previous month. Core CPI, excluding energy and food prices, increased by 3.6% compared to 3.8% in March.
Core CPI increased by 4.1% in the last three months. This was down from the 4.5% level in March but still higher than the last half of 2023 and above the level associated with the Fed’s 2% target.
Tips: Houses is an information card that can prevent the currency from returning to an attractive level. This was the biggest factor in the monthly increase in CPI by 0.3%.
Rents increased by 0.4% for the third month in a row; This is still a strong increase, it does not reflect the downward trend in inflation in private sector data.
Fed Chairman Jerome Powell told reporters earlier this month that he hoped housing inflation would eventually show up in government data “but he’s not sure when that will happen.”
Between the Lines: April data alone is not enough to convince central bank officials that inflation has slowed enough to allow interest rate cuts this summer.
Overall GDP figures for core group food sales fell 0.3%, contrary to analysts’ expectations for a slight increase. Case : Modest numbers from the strong March quarter may have been exaggerated over the Easter period, but collectively they show consumer spending coming out of a big deficit, which is what the Fed wants to see. if it wants to loosen the policy later this year.
Some anecdotes point in the same direction. Home Depot on Tuesday reported a 2.3% decline in quarterly sales, which was “due to a slow start to spring and the ongoing unwinding of some undesirable projects,” CEO Ted Decker said Tuesday.
Bottom Line: “The April retail sales report shows U.S. consumers trading cautiously as the labor market softens and prices remain high,” wrote Lydia Boussour, chief economist at EY-Parthenon.
