Firm News

The April Consumer Price Index (CPI) showed that inflation moderated last month, but a data-dependent Federal Reserve will likely need to see more dovish developments before it enacts its first interest rate cut, experts say.

Headline inflation rose 0.3% in April vs 0.4% the previous month, the Bureau of Labor Statistics said Wednesday, matching economists’ forecast. On an annual basis, headline inflation increased 3.4%. That was lower than March’s print of 3.5%.

Core CPI, which strips out volatile food and energy costs and is considered a better predictor of future prices, rose 0.3% month-to-month. That was slower than the 0.4% increase seen the previous two months, and also matched forecasts. On an annual basis, core CPI rose 3.6%, or the lowest level in three years, vs the 3.8% rate seen in the prior two months.

“Inflation numbers were exactly what a lot of market participants were hoping to see after two months of reacceleration. Core goods appear to be the driving force this month with large declines in mainly discretionary spending areas like used vehicles, furniture, sporting goods, pet products and other general recreational goods. This makes sense when taken in combination with the retail sales numbers that were released this morning as well, which came in very weak vs March’s figure.” Clayton Allison, portfolio manager at Prime Capital Investment Advisors.

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