US CPI |Hotter Than Hoped.
Although US CPI decelerated in April, it remains far too high:
- Headline CPI rose 0.3% (0.2% expected) leaving the annual rate at 8.3% (8.1% expected)
- Core prices rose 0.6% (0.4% expected) bringing the annual rate to 6.2% (6% expected)
Base effects will help annual CPI to fall, however a long list of potentially inflationary factors persist:
- The war in Ukraine pushing grain prices higher
- Avian flu providing a lift to meat prices
- Gasoline prices moving higher as the summer driving season looms
- Lockdowns in China snarling supply chains, leading to higher new car prices
- Strong demand for travel pushing airline ticket prices and hotel rates higher
Conclusion:
The Federal Reserve will remain focused on preventing inflation expectations from becoming unmoored and will deliver two or three more 50 bps hikes in succession.
Today’s data most likely has little impact on markets, as they have already taken into account an aggressive tightening path.
