US Inflation Slightly Weaker than Forecast in April

While investors have long speculated that a pause in the Fed’s campaign to lower inflation would be followed by a string of rate cuts, recent data releases have highlighted the strength of inflationary pressures. The labor market remains hotter than expected, and an alternative measure of core inflation also came in stronger than forecasts late last month.

Futures markets suggest that investors have scaled back their expectations for how quickly the Fed will pivot to rate cuts since the jobs data, but still see a strong likelihood of cuts by the end of the year. However, Kevin Cummins of NatWest Markets cautioned that “the April data will not be definitive” for deciding the Fed’s next steps, as another month of CPI data will be published shortly before its next policy meeting.

Investors and policymakers will also pay attention to updated figures on producer price inflation, to be published on Thursday, and consumer inflation expectations on Friday.

In conclusion, the latest data showed a slightly weaker-than-expected US inflation rate in April, boosting Treasuries and Wall Street stocks as investors gained confidence that the Federal Reserve’s interest rate hikes are bringing price increases under control. However, policymakers and investors will continue to monitor the data closely to determine the Fed’s next steps.