As the US April CPI data was released today and the market was relieved, the data was not as bad as expected and showed some hope for further price declines. The numbers showed:
- Consumer price index rose 4.9% year-on-year in April
- Monthly consumer prices rose 0.4% in April
- Core prices (excluding food and energy) rose 5.5% y/y in April
- Excluding housing, food and energy, April prices were up 3.7% year-on-year.
- Used car prices rose 4.4% in April
Inflation is well above the Fed’s 2% target, but things could have been much worse. Used car and truck prices rose 4.4% month-on-month, while energy prices rose 0.6%. Gasoline prices rose 3.0%. Shelter continued to rise, but at a slower pace than last month (0.4% in April, 0.6% last month and 0.8% in February). For the year, shelters are still up 8.1%. The haven component accounts for 34% of total CPI, which was the main driver of inflation last year. Analysts still expect housing costs to cool in the coming months. Food prices remained flat for the second month in a row, but were still up 7.7% for the year. Food prices are 13.7% of CPI.
Falling CPI inflation in April makes it more likely that the Federal Reserve will pause rate hikes at its next meeting. We have one more jobs report and CPI release ahead of the next Federal Reserve meeting in mid-June. Yes, this is tightening Federal Reserve policy. Also, next month’s consumer price index is likely to benefit from the unfolding YoY calculation, with him up 1.0% from a year ago. If the headline real numbers are somewhat subdued, he could be closer to 4%-4.5% year-over-year next month. Moreover, two months ahead drops an increase of 1.3% from a year ago. This would bring the year-on-year decline to near 3% to 3.5% barring another price shock.
Now that the Fed Funds rate has moved from its target terminal rate of 5.00% to 5.25% (or 5.11%), Fed officials have shifted their focus away from lagging indicators of economic activity such as employment, and the recent bank failures have led to lending. Considering the impact on Situation and slowdown in economic activity. Bank of America reported a slowdown in spending due to credit and debit card usage as anecdotal evidence of some contraction in spending.
That doesn’t mean the Fed will cut rates (Fed officials suggest they won’t cut rates this year), but it does make it more likely that no further rate hikes will occur.
US stocks were mixed, with the Dow Jones Industrial Average falling for seven straight days in eight days in May. The S&P and Nasdaq indexes rose for three days in a row. The Nasdaq index climbed about 1% to take the lead. Here are the final numbers:
- The Dow Jones Industrial Average fell -30.48 points or -0.09% to 33531.34.
- The S&P index rose 18.45 points (0.45%) to 4137.63.
- The Nasdaq Index rose 126.88 points or 1.04% to 12306.43.
Yields are falling sharply in the US bond market today.
- 2 years 3.913% -11 basis points
- 5 years 3.382% -11.2 basis points
- 10 years 3.440% -8.1 basis points
- 30 years 3.797% -5.2 basis points
The US Treasury Department successfully auctioned the 10-year bond at 3.448%, with considerable demand from domestic and foreign buyers.
Other markets:
- Gold fell $4.14 or -0.22% at $2030
- Silver fell $0.21 (-0.80%) to $25.37.
- WTI crude falls $0.94 to trade at $72.77 after settling at $72.56
- Bitcoin is trading at $27,889 after reaching an intraday low of $26,842. The high was $28,328.
In the forex market, the Japanese Yen is about to end the day as the strongest currency among the major currencies. USD is the weakest. The US dollar today was little changed against the pound, Swiss franc and Canadian dollar, but showed solid gains against the Japanese yen and New Zealand dollar.
From the strongest to the weakest of the major currencies
