US CPI: Inflation in April Cools to a Four-Year Low of 2.3%. Are Interest Rate Cuts Coming?

Contrary to Wall Street’s expectations, consumer prices in April marked a deeper decline than the 2.4% increase eyeballed.

👊 April Inflation Is Pretty Cool

• US inflation for April came in lower than expected at 2.3% year over year, the latest consumer price data USCPI showed. Markets had been pricing in a 2.4% clip for the month, the same as the one logged in March. But there you have it — tariff fears, outlook uncertainty and a robust labor market didn’t lead to higher prices.
• Does this brighter scenario mean that the Federal Reserve will be more confident in slashing borrowing costs. That’s the million dollar question. Interest rates, Jay Powell has said, will come down once inflation expectations normalize.

🧐 Lowest Print in Four Years

• The monthly increase also surprised to the downside at 0.2% against expectations for 0.3%. Core inflation, however, was precisely as expected with prices growing 2.8% on the year. Month on month, there was another upbeat figure — 0.2% against 0.3% expected.
• The annual reading of 2.3% was the lowest we’ve seen since February 2021, right before the line started to soar and go ballistic to hit a 40-year high a year later.

👀 What’s Making Moves?

• Reactions across the board: stocks in the US opened higher with the S&P 500 advancing about 0.1%. The Dow Jones Industrial Average was hesitating and hugging the flatline and the tech-heavy Nasdaq Composite kicked off the session higher by a modest 0.3%, looking to extend its powerful Monday swing.
• The US dollar retreated against the other major currencies with the EURUSD climbing about 50 pips to $1.1140. The USDJPY stayed largely flat after the announcement, floating near the 148.00 mark.