Chat with us, powered by LiveChatUS Inflation Cools Down in April, Markets Await Fed's Decision

US Inflation Cools Down in April, Markets Await Fed's Decision

US Inflation Cools Down in April, Markets Await Fed's Decision

US Inflation Cools Down in April, Markets Await Fed's Decision

  • Annual consumer prices rose 3.3%, lower than expected, with monthly prices unchanged.
  • Core inflation eased, increasing chances of a September rate cut.

US Consumer Prices Rise 3.3% Annually, Below Forecasts

The latest Consumer Price Index (CPI) data for the United States was released, providing insights into the current state of inflation. The CPI report revealed that consumer prices rose by 3.3% on an annualized basis, which was slightly lower than the expected 3.4% increase. This marks a deceleration from the previous month's rate of 3.4%. On a monthly basis, prices remained unchanged, a significant slowdown from April's 0.3% gain. This is the first time since July 2022 that the CPI has not risen on a monthly basis.

Excluding volatile food and energy costs, core inflation also showed signs of easing. Core prices rose by 0.3% from March to April, down from three consecutive months of 0.4% increases. On an annual basis, core prices increased by 3.6% in April, down from 3.8% in March.

The market reaction was evident as Treasury yields fell alongside the dollar, while the swap market priced in a 72% probability of a rate cut in September, up from 50%. The market will also await today's Federal Reserve meeting for further clarity on the future of rate cuts.

Inflation Cools After Unexpectedly High First Quarter

The inflation rate had been unexpectedly high in the first three months of this year after a steady decline in the second half of 2023. The Federal Reserve has raised its key interest rate 11 times from March 2022 to July 2023, reaching a two-decade high of 5.3% in an effort to control rising prices.

The latest CPI data indicates a cooling of inflation, with both annual and monthly rates showing signs of deceleration. While this is a positive development, it remains to be seen how the Federal Reserve will respond in its upcoming policy meeting. The markets have reacted positively to the news, but the long-term economic implications will depend on future inflation trends and the Fed's actions.

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