A slightly soft April core CPI reading vs consensus (0.24% M/M vs 0.26% MNI unrounded Median, 0.06% prior) came amid an undershoot on core goods prices and a slightly above-expected core services reading.
The latter came largely on account of rebounds in volatile services categories though: namely lodging, car insurance, and airfares (which combined contributed 0.14pp more to core CPI than they did in March).
Rental inflation was a touch stronger than expected again this month, but supercore CPI at 0.21% M/M was exactly in line with MNI consensus.
The biggest hint of a tariff-induced pickup in inflation is that core goods ex-used cars CPI posted the strongest unrounded rate of inflation since March 2023. Category-by-category though, it was less clear.
The CPI report drew very little market reaction as it came in reasonably close to expectations.
There were net dovish takeaways from Thursday’s PPI report albeit with the caveats including the fact that it’s likely too early to observe price impacts from April’s reciprocal tariffs.
Overall the month’s inflation data is set to keep the Fed’s preferred PCE price gauge in tame territory, with consensus for core PCE closer to 0.1% M/M for the month vs 0.2% coming into the week.
Albeit that too comes with caveats, including a likely upward revision to March PCE, and the fact that the idiosyncratic “Portfolio management & investment advice” category was a major deflationary impulse.
A next Fed cut is only just fully priced for the September FOMC (three meetings away) along with a cumulative 55bp of cuts for 2025.