In this morning’s data, the Consumer Price Index increased 0.3% in April and 8.3% on an annual basis, more than expected. Monthly prices for Transportation Services, up 3.1%, and Utility Gas Service (natural gas), also up 3.1%, were strong while Gasoline prices were weak, down -6.1% for the month but that follows the 22.3% increase in March. Prices for Used Cars and Trucks also decreased slightly, down -0.4% for the month. The core rate, which excludes prices for food and energy, increased 0.6% in April and 6.2% on an annual basis, also more than expected.
Overall, still high inflationary levels in April, driven by higher costs for items such as plane tickets and natural gas. The annual rates of change were lower than the previous month for both the headline figure (was 8.5%, now 8.3%) and core figure (was 6.5%, now 6.3%) as base effects start to impact the data. However, the 0.6% monthly change in April for the core rate is higher than the 0.3% the previous month, showing little signs of slowing. Given these dynamics and a tight labor market, the Federal Reserve should be very focused on tightening policy in the months ahead.
In all, the 10-year US treasury yield ticks higher following the report and equity futures are lower as we head into the market open.
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