U.S. CPI fell as expected in April, and expectations for a Fed interest rate cut have picked up!

U.S. CPI fell as expected in April, and the Fed breathed a sigh of relief! The swap market has raised its expectations for the speed of interest rate cuts by the Federal Reserve during the year… At 20:30 Beijing time on Wednesday, the United States released April CPI data

U.S. CPI fell as expected in April. The Fed breathed a sigh of relief! The swap market has raised its expectations for the speed of interest rate cuts by the Federal Reserve during the year… At 20:30 Beijing time on Wednesday, the United States released April CPI data.
The non-seasonally adjusted CPI annual rate in April was 3.4%, lower than the 3.5% in the previous month. In line with market expectations.
The core CPI monthly rate in April fell back to 0.3% as expected, the lowest since December last year.
U.S. retail sales unexpectedly fell on a monthly basis in April, recording 0%, lower than market expectations of 0.4%.
The U.S. core CPI monthly rate cooled for the first time in six months, indicating that price pressures are gradually weakening and supporting the Federal Reserve\’s intention to maintain higher interest rates for a longer period of time.
Economists believe that the core indicator better reflects underlying inflation than the overall CPI.
While the data may give the Fed some hope that inflation is resuming its downward trend, officials want to see more data to gain the confidence they need to start considering a rate cut.
Federal Reserve Chairman Powell said yesterday that the Fed will need to remain patient and let restrictive policies take effect. Some policymakers do not expect to cut interest rates at all this year.
After the CPI data was released, spot gold jumped by $15 in the short term. Spot silver stood at $29 per ounce, a new high since April 16.
The U.S. dollar index DXY plunged nearly 40 points in the short term. The U.S. dollar fell as much as 1.00% against the Japanese yen during the day.
U.S. 2- to 10-year Treasury bond yields fell more than 10 basis points during the day after the CPI was released.
U.S. short-term interest rate futures rose after the release of CPI data. Swaps markets expect the Federal Reserve to cut interest rates at an accelerated pace in 2024. Traders strengthened their bets that the Federal Reserve will cut interest rates in September and December.
UK interest rate futures are fully pricing in two 25 basis point rate cuts from the Bank of England before November. That\’s slightly higher than the 47 basis point rate cut before the data was released.
Traders slightly increased bets on a rate cut by the European Central Bank in 2024. A rate cut of 73 basis points is expected in 2024. It was 71 basis points before the data was released.
Coupled with some downward revisions to previous data, this is a truly weak report and the Atlanta Fed should at least lower its growth forecast for the current quarter, macro sources said.
Needless to say. All of this looks pretty good for financial assets. But it\’s worth noting that super core services inflation (0.42% m/m) remains above the Fed\’s expectations.
Analyst Chris Anstey said that the month-on-month increase in core CPI was in line with expectations. The month-on-month increase in overall CPI was slightly lower than expected.
The Fed will breathe a sigh of relief after seeing the preliminary data here.
They can still claim that the process of falling inflation is underway.
David Kelly of J.P. Morgan Asset Management said the U.S. economy is slowing modestly, adding that inflation is going through the sweet time of falling and a rate cut in September is possible.
Kelly said that the economy will not enter a long-term high environment, but a long-term normal environment.
He said there is nothing wrong with the 10-year Treasury bond yield at 4.5%.
\”This is just a recalibration cycle,\” said Tom Porcelli of PGIM Fixed Income.
He said that although he mainly criticized Powell, he must admit that Powell has done a good job recently.
He said the Fed does not need to overreact to every report.
He added that in his view, Powell is a Fed chairman who wants to cut interest rates.
Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said overall price pressures remain high but are moving in the right direction.
We believe that the data supports the Fed\’s patient approach to future policy decisions. The basic situation this year is still lower interest rates.
Jeffrey Roach, chief economist at LPL Financial, said the Fed is unlikely to start cutting interest rates until there is more confirmation that consumer prices are slowing.

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