April’s Consumer Price Index numbers were reported this week, the numbers show small signs of cooling in the economy. April CPI data showed a 3.4% year-over-year gain, lower than March’s 3.5% increase. Headline inflation was 0.3%, coming in at a tenth of a percent below analyst expectations of 0.4%. Core prices for goods declined 0.1%, and prices for core services rose only 0.4%, the smallest gain for services pricing since December. Markets rose off of these numbers as many people are hoping that this means that inflation can start declining towards the Fed’s goal of 2%, but these numbers alone aren’t quite enough to celebrate. Megan Leonhardt of Barron’s wrote, “As it is, both core and headline CPI inflation remain above 3% and services price growth remains stubbornly north of 5% in year-on-year terms. In particular, shelter inflation is still too high: It has come in at a monthly pace of 0.4% for the past three consecutive months and landed at 5.5% year over year in April.”
Nigel Green, CEO of international financial consultancy at deVere Group said, “Super cautious Fed officials will need to see several consecutive months of evidence showing inflation—which is proving far stickier than had been hoped—is really heading back to the 2% target before they consider a pivot on monetary policy,” This is just step one on our way back to lower inflation and interest rates, Jason Pride of Glenmede wrote, “From the Fed’s perspective, today’s CPI report is a step in the right direction, but they will need to see several of those steps strung together before getting too excited about imminent rate cuts. It does alleviate some concerns that they may not cut at all this year, but it does not yet put rate cuts on the table immediately.” Although these numbers are indicating a cooling down in inflation and the economy, they only resemble a small crack in inflation, consecutive months like this will be needed for the Fed to start a rate cut campaign.
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