The U.S. Bureau of Labor Statistics announced that the annual increase in the consumer price index (CPI) in April was 3.4%, in line with market expectations. This data shows that prices and economic activity have not accelerated again, ending the past four times of exceeding expectations.
After the release of the CPI report, market expectations for an interest rate cut by the Federal Reserve also began to be repriced. According to FedWatch data, the market currently believes that the probability of the Federal Reserve cutting interest rates before July is 32%, and the probability of cutting interest rates before September is as high as 73.8%. This good news also brought upward momentum to U.S. stocks and cryptocurrencies.
However, Wall Street Journal reporter Nick Timiraos, known as the Fed's mouthpiece, pointed out in the latest report that as far as the April CPI report itself is concerned, the data is not enough to change the Fed's expectations on whether and when it will start to cut interest rates. Nick Timiraos further said that the significance of April's CPI data is that it retains the possibility of an interest rate cut this year and calms some people's concerns that the Federal Reserve may need to open the "door to raise interest rates" again.
Nick Timiraos predicts that Fed officials may need two additional CPI reports to increase confidence that "inflation can return to lower levels before the new crown epidemic", so the Fed may not cut interest rates before September.
This article: Slowing CPI boosts hopes of rate cut! Fed’s mouthpiece: No interest rate cut before September appeared first on Zombit.