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US CPI Shows Annual Inflation Rate at 4.9% in April
Core inflation, which does not take food and energy costs into account, stood at 5.5% in April.
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The year-over-year consumer price index (CPI) stood at 4.9% last month, compared to a consensus projection of 5%. The Federal Reserve will have an additional CPI report before deciding whether to pause its policy-tightening crusade.
Core Inflation Stands at 4.9% in April
U.S. Bureau of Labor Statistics (BLS) published the latest CPI report on Wednesday, showing that annual inflation stood at 4.9% in April, while economists expected 5%. This compares to the March annual CPI of 5%.
Inflation rose by 0.4% over last month versus consensus estimates of a 0.4% surge. The month-on-month change was higher/lower than the previous increase of 0.1%.
Annual Core CPI – a key inflation metric that ignores volatile food and energy costs – rose to 5.5%, compared to the estimated 5.5%. The previous CPI report showed that core CPI rose to 5.6% in March. Month-over-month, core CPI climbed by 0.4% from March to April, while economists sought a 0.4% increase.
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What’s Next for the Fed?
Today’s inflation data marks the first of two CPI reports Federal Reserve policymakers will examine before announcing their next interest rate decision in June. Earlier this month, the Fed hiked rates by another 25 basis points (bps), in line with expectations.
However, the US central bank signaled this may be the last interest rate increase for the time being. Even though its fight against inflation has been slow and bumpy, the Fed must consider the recent turmoil in the banking sector and the implications of its year-long policy tightening.
Several high-profile banks collapsed in the US after US regulators seized the Silicon Valley Bank (SVB) control. The SVB’s implosion triggered the worst banking crisis since 2008, causing a knock-on effect on Signature Bank, Credit Suisse, and Silvergate.
The Fed has been raising benchmark rates non-stop since March 2022, marking its most aggressive tightening campaign in roughly 40 years. Still, its rate hikes in 2023 were notably less combative than a series of jumbo 75 bps increases last year.
Apart from the CPI report, the BLS is set to report new data on prices paid to producers on Thursday. Most economists expect strength in cost pressures for April compared to a month earlier.
Do you think the Federal Reserve will hike rates in June following today’s CPI data? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
