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U.S. Inflation Eased Less Than Hoped in April Due to Strong Core CPI

Economic Indicators May 11, 2022 08:37AM ET
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© Reuters

By Geoffrey Smith 

Investing.com -- U.S. inflation eased slightly in April but stayed close to a 40-year high, as strong price pressures in the broader economy continued to make themselves felt.

The annual headline rate of inflation fell to 8.3% from 8.5%, as last year's surge in used car prices started to drop out of the year-on-year calculations. However, that was still above the 8.1% expected.

U.S. stock futures immediately turned negative in response to the news, which reinforced expectations that the Federal Reserve will have to tighten monetary policy aggressively to bring inflation down. Money market futures moved to price in a higher likelihood of the Fed raising the fed funds target rate by 75 basis points at its next meeting in June, even though Fed Chair Jerome Powell had indicated at his last press conference that the Fed isn't "actively" discussing steps of more than half a point.

By 8:45 AM ET (1245 GMT), S&P 500 Futures lost 68 points, or 1.6%, to trade down 0.6% from Tuesday's close. Stocks had been on course to open higher before the data broke. By the same token, benchmark 10-Year U.S. Treasury yields rose 4 basis points to trade back above 3%.

The reason for the overshoot was another bigger-than-expected rise in core prices, which strip out volatile food and energy price movements. The core CPI rose 0.6% on the month, rather than the 0.4% expected. That was twice the 0.3% increase posted in March and was the biggest increase for three months, suggesting that the recent trend in inflation is hardly improving, if at all.

Prices for essentials such as shelter rose another 0.5%, the third month in a row they had risen by that much. Shelter costs are now up 5.1% on the year. New car prices also rose 1.1%, while the decline in used car prices slowed to only 0.4% from 3.8% in March. Prices for services, in general, rose 0.7%, with transportation services rising a seasonally adjusted 3.1% from March as demand for both tourism and business travel rebounded.

Airlines and hotel operators have both issued a string of upbeat forecasts for the rest of the year in their recent quarterly reports. Airfares alone rose an average of 18% on the month in April, for a 33% annual gain from last year's pandemic-depressed levels.

Food prices, meanwhile, continued to rise at a clip of nearly 1% a month, as they have done for the last six months.

"Inflation fell back from its 40-year high in April, but it's really really really high...and sequential core inflation momentum is concerning," said EY chief economist Greg Daco via Twitter.

Julia Coronado, a former Fed economist and founder of consultancy MacroPolicy Perspectives, was more sanguine, saying that while the economy is "not out of the woods" with regard to inflation, there were signs of hope in that more categories of goods and services were starting to show falling prices.

U.S. Inflation Eased Less Than Hoped in April Due to Strong Core CPI
 

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Comments (47)
Oleksii Trugov
Oleksii Trugov May 12, 2022 4:48AM ET
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I see that some Americans would rather blame Biden for invasion than Putin. Good job, comrades. Putin approves.
William Smith
William Smith May 11, 2022 11:55AM ET
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If anyone watched Biden's pathetic speech yesterday about inflation you know just how screwed America is.
Raj Guleria
Raj Guleria May 11, 2022 11:55AM ET
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Dear William , at least you have freedom & can criticise your President , consider yourself lucky as if U were born in Russia / India / China ....U will be behind bars for this :) .....!
Tre Hsi
Tre Hsi May 11, 2022 11:55AM ET
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I remember when President Orange insisted the Fed should drop interest rate to zero, I wonder someone like that would have a better solution to fight inflation.......well, maybe not
Marco cuevas
Marco cuevas May 11, 2022 11:05AM ET
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Only nasdaq down seems like somebody miscalculated the algos....bet they are panicking options close in two days damage control in full swing....some big firms losing a lot of money today.
Yison Yison
Yison Yison May 11, 2022 10:52AM ET
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while politician cried for high inflation, they still supply weapon to war, jack up fuel price...
ajay jayaraj
ajay jayaraj May 11, 2022 10:52AM ET
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.....then buy some oil stock.......
Tre Hsi
Tre Hsi May 11, 2022 10:52AM ET
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so it's the politician supply weapon to Ukraine that's causing the inflation, not the guy who invaded Ukraine in the first place?  yeah OK
James Pattison
James Pattison May 11, 2022 10:34AM ET
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This is always the democrats plan… more poverty more hopelessness in the hopes more people look to governemnt to take care of them…
la popeye
la popeye May 11, 2022 10:34AM ET
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yes, what do you think it is coming from ? politician,? fed ? both?right, both!what the effect of QE and others manipulations. Yesterday ? or a few years ago ?When will we have the effect of int rising. Tomorrow ? in a year...? 2 years ?ok, now you get my point !
Tre Hsi
Tre Hsi May 11, 2022 10:34AM ET
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"This is always the democrats plan… more poverty more hopelessness"  -- stock markets tripled under Bill Clinton, and also nearly tripled under Obama, now that little inconvenient fact is out of the way, you can go back to your rants
PETER LENK
PETER LENK May 11, 2022 10:14AM ET
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riiight... "hoped for"... by whom? Ridiculous elitist headline
Hedge Fund
Hedge Fund May 11, 2022 10:11AM ET
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2008 was the last recession (real estate bubble)caused by C.D.O.s and predatory loans. now REITS ,malls, mom and pop shops are closing en masse. we are long due for a recession if not depression.consumer staples and REITS will show how close we are to a recession
Samer Diab
Samer Diab May 11, 2022 10:11AM ET
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not until the 10 Year 3 months yield curve inverts
Mart Bab
Rubberduck1973 May 11, 2022 10:07AM ET
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Very soon the S&P will ease more . Make shore you buy gold which will ease less from 2500
Samer Diab
Samer Diab May 11, 2022 10:07AM ET
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gold doesn't always do well in a recession
Mart Bab
Rubberduck1973 May 11, 2022 10:00AM ET
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so it’s hope that curbs inflation? Crazy times. Keep hoping then. Also, less than hoped or more than anticipated? It depends if you are a wishful thinker or a trader backing himself up with the facts. And last, cpi should have been much lower due to strung dollar. As high as it is now, actually means a plus from the last figure
Mark Jannetty
Mark Jannetty May 11, 2022 9:46AM ET
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more is more.
 
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