U.S. core CPI growth slowed in April, boosting expectations for interest rate cut in September

Although housing costs continue to rise, the prices of new cars, used cars and other goods have accelerated their decline. Coupled with the slowdown in the cost growth of the service industry, the growth of the core consumer price index (CPI) in the United States in April slowed down, which not only caused the Federal Reserve (Fed) to ) breathed a sigh of relief and also boosted market expectations for an interest rate cut in September.

Although housing costs continue to rise, the price of new cars, used cars and other goods has accelerated. In addition, the cost growth of the service industry has slowed. The slowdown in the growth of the US core consumer price index (CPI) in April not only gave the Federal Reserve (Fed) some relief. The tone also boosted market expectations for an interest rate cut in September.
Specifically, the U.S. Bureau of Labor Statistics (BLS) released data on Wednesday (15th) showing that the annual CPI growth in April was 3.4%, which was in line with market expectations and slightly lower than the previous value of 3.5%. On a monthly basis, the growth was 0.3%, which was lower than market expectations and the previous value of 0.4%. %.
April CPI increased by 3.4% year-on-year, in line with market expectations.
(Picture: ZeroHedge) The Fed’s favorite inflation indicator, core CPI, which excludes food and energy costs, increased by 3.6% in April, hitting a three-year low, in line with market expectations, lower than the 3.8% value before March; looking at the core CPI on a monthly basis The 0.3% increase was in line with market expectations and was lower than the 0.4% increase in March, the first decline in six months.
Core CPI increased by 0.3% in April, down from 0.4% in March, the first decline in six months.
(Graphic: ZeroHedge) While the data may give the Fed some hope that inflation is returning to its downward trend, policymakers will want to see more data to gain the confidence they need to start considering a rate cut.
Fed Chairman Jerome Powell said yesterday that the central bank needs to remain patient and let restrictive policies take effect. Some policymakers predict no interest rate cuts at all this year.
The exchange rate market estimates that there is more than 80% chance that the Fed will cut interest rates by 1 point (25 basis points) in September.
A few economists expect the Fed to start cutting interest rates in July, but a few others think it may not be until December.
Some analysts pointed out that this CPI report does open the door to possible interest rate cuts later this year, but more data will be needed to show that inflation is cooling before the Fed will take action.
Energy and housing costs continue to rise. Observation report on falling prices of new and used cars shows details. Rising energy and housing costs in April remained the biggest obstacle to cooling inflation. Falling prices of new and used cars pushed inflation to slow down.
Rising energy and housing costs remained the biggest obstacle to cooling inflation in April, while falling prices for new and used cars pushed inflation growth to a slower pace.
(Picture: ZeroHedge) The energy index increased by 1.1% in April, which was the same as before, the gasoline index increased by 2.8%, the fuel index fell by 1.3%, and the electricity index increased by 0.9%.
It is worth noting that housing costs, the largest category in the services industry, increased 0.4% for the third consecutive month, and transportation services increased 0.9% in April after rising 1.5% in March.
Although housing costs accelerated in April on a monthly basis, they continued to slow down on a year-on-year basis.
(Picture: ZeroHedge) In addition, the new car index fell by 0.4% month-on-month in April, and the used car and truck index fell by 1.4%. The decline further expanded from March; the clothing index increased by 1.2%, and medical care goods and services both increased by 0.4%.
As for the core services CPI (excluding housing) that the Fed closely monitors, it grew by 0.5% in April and by 5.05% year-on-year, hitting a new high since April 2023, with education costs and transportation costs accounting for the highest proportions.
The super inflation indicator increased by 5.05% year-on-year in April, hitting a new high since April 2023.
(Picture: ZeroHedge) At the same time, commodity prices in April were falling at the fastest rate since April 2004, while the annual growth rate of service prices remained at around 5.3%.
Commodity prices were falling in April at the fastest pace since April 2004.
(Picture: ZeroHedge) Expert opinion Morgan Stanley E*Trade analyst Chris Larkin believes that this report shows cooling inflation coupled with cooler retail sales data during the same period, increasing investors’ expectations that the Fed will cut interest rates once or twice before the end of this year. hope.
LPL Financial analyst Jeff Roach believes that despite the encouraging inflation report, the Fed may not begin cutting interest rates unless there is more evidence that prices are slowing.
Markets digested the report and expected a first rate cut in September.
Market reaction After the release of the report, major U.S. indexes rose, U.S. bond yields and the dollar fell, and gold futures rose.
As of press time, the Dow Jones Industrial Average rose more than 140 points, or nearly 0.4%, the Nasdaq Composite Index rose nearly 100 points, or nearly 0.6%, the S&P 500 Index rose nearly 0.5%, the Philadelphia Semiconductor Index rose nearly 1%, and the 10-year U.S. Treasury yield yield It fell to 4.383 and the U.S. dollar index fell to 104.71. Gold futures rose 0.27% to US$2,366.20 per ounce.
According to the CME Group\’s FedWatch tool, the probability of the Fed cutting interest rates by 1 percentage point in September is 53%, the probability of cutting interest rates by two percentage points (50 basis points) is 16.8%, and the probability of cutting interest rates by three percentage points (75 basis points) is 0.5% while keeping interest rates unchanged. The probability of change is 29.8%.
In addition, the probability of the Fed cutting interest rates in November is as high as 82.3%.
Figure: CME Group FedWatch Tool

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