In April, the US consumer price index (CPI) rose 4.9% year-on-year, the smallest increase in two years. As the economy showed signs of cooling and inflation slowed, the prospect that the US Federal Reserve System (Fed) would freeze its benchmark interest rate next month strengthened the prospect.
The U.S. Department of Labor announced on the 9th (local time) that the U.S. CPI rose 4.9% year-on-year in April, down from 5.0% in March. This is slightly lower than the US Wall Street forecast (5.0%). This is the lowest increase since April 2021. Compared to the previous month, it rose 0.4%, which is higher than March (0.1%). This is due to rising housing and energy prices.
Excluding energy and food, which are highly volatile, the core CPI rose 5.5% from the same month last year and 0.4% from the previous month. Each figure was in line with expectations.
The market is somewhat relieved by the CPI for April, which was in line with expectations. Employment in April far exceeded expectations, raising concerns about rising inflation pressure, as the CPI announced today is interpreted as an indicator that US prices are cooling. Right after the CPI announcement for April this morning, the New York Stock Exchange futures index turned upward.
Previously, while taking a baby step (0.25 percentage point), the Fed hinted at the possibility of ending the rate hike, but added a clue that “it will make a decision based on real-time economic indicators.” Moreover, the previous day, Federal Reserve Bank of New York (Fed) President John Williams opened up the possibility of raising interest rates, saying, “I haven’t said that the rate hike is over yet.” This is why the CPI indicator drew attention to whether the Fed’s tightening cycle, which raised interest rates by 5 percentage points 10 times over 14 months, would end.
According to the FedWatch of the Chicago Mercantile Exchange, interest rate futures investors are predicting an 86% chance of a June Fed freeze as of 9:00 am EST on the 10th.
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Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.