CPI Data Proves Fed Has A Long Battle Against Inflation

The key report of the week was released on Wednesday. The annual inflation rate in the US dropped in April to 8.3% from the March 8.5% reading (41-year high). The increase was larger than expected. Analysts at Wells Fargo point out April’s CPI data served as a reminder that the Fed has yet a long fight ahead of it to contain hot inflation.

Key Quotes

“Core inflation rose 0.6% in April, hotter than even our above-consensus call for a 0.5% increase and a pickup from last month’s 0.3% rise. After slipping in March, core goods prices rose 0.2% in April. The resilience of core goods prices can be tied to a more modest drop in used vehicles and a 1.1% jump in new vehicles as the BLS incorporated new source data with today’s release.”

“The onslaught of inflation this past year eased somewhat in April with the Consumer Price Index posting its smallest gain in nine months. Prices rose 0.3% over the month compared to consensus expectations for a 0.2% rise. Yet even accounting for the moderation, prices continue to rise at a formidable pace. While the year-over-year rate of CPI inflation slowed for the first time since August, prices are still up 8.3%—a rate unthinkable a year ago.”


“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.”