MNI US Inflation Insight: Only A Hint Of Tariff Impact So Far

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EXECUTIVE SUMMARY:

• 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.