Inflation pressures in America firmed last month, according to a new report from the Bureau of Labor Statistics (BLS). Specifically, the consumer price index (CPI) for all urban consumers rose by 0.2 percent in April, a smaller increase than expected but enough to lift the year-over-year gain to 2.5 percent. Much of the headline strength last month was due to a 1.4 percent jump in energy prices and a 0.3 percent rise in food costs. “Core” CPI, though, which excludes those volatile components, still increased by 0.1 percent in April.
That was slightly below forecast as sharp declines in the costs of motor vehicles and airfares offset gains in apparel, medical care, and shelter. Zooming out, U.S. inflation pressures have somewhat moderated in 2018, as evidenced by 3-month annualized core CPI falling in April back below 2 percent, and yesterday’s data on wholesale inflation once again coming in a bit softer than expected. However, price pressures in America are still far from weak enough to derail the Federal Reserve’s plans to continue raising interest rates this year. In fact, current market pricing still implies a 100 percent chance of the next rate hike occurring at the June Federal Open Market Committee (FOMC) meeting.
Sources: Econoday, U.S. DoL, Bloomberg, ZH, CME, FRBSLPost author: Charles Couch