April CPI: A Core Problem

Summary

Restoring price stability was never going to be an easy task. April’s CPI data served as a stark reminder that the Fed has a long road ahead of it in bringing down inflation. Although price growth showed signs of easing in April, inflation still came in stronger than expected. The Consumer Price Index rose 0.3% in April, bringing the year-over-year rate down to 8.3%. Meanwhile, core inflation picked up to 0.6%, as a softening trend in goods prices was not enough to overcome the upward trend in services. Although base effects are starting to help drive the year-over-year rates of inflation lower, that will no longer be the case come mid-summer. With the underlying trend in inflation still well-above what the Fed considers desirable, another 50 bps rate hike at the June 14-15 FOMC meeting seems all but assured, with further hikes of that magnitude highly likely to follow in our view. READ FULL ARTICLE>>