The April consumer-price index reading could be the sign of peak inflation stock investors are waiting for when it’s released on Wednesday. Or not.
Economists polled by The Wall Street Journal expect the CPI to show a 0.2% increase in April from March, a sharp slowdown from the prior 1.2% month-over-month pace as energy prices retreated a bit. However, economists expect core inflation, which excludes volatile food and energy prices, to tick up to a 0.4% increase in April, versus a 0.3% increase the month prior.
On a year-over-year basis, economists expect CPI rose 8.1% in April, down from an 8.5% annualized pace in March, with the annualized core rate falling to 6% in April from 6.5% in March. Declines in these readings would mark the first time in five months that the index hasn’t increased at the fastest pace in 40 years.
“We expect the moderation to be driven by the energy component, which likely posted its first monthly decline since April 2021,” Kevin Cummins, chief U.S. economist at NatWest, wrote in a note. “In contrast, the food and core (ex food and energy) components could have posted faster gains.”
While one month of data don’t cement a trend, market observers are hoping signs of moderating inflation will keep the Federal Reserve on its steady, predictable path to raise rates and tighten policy. Fed Chairman Jerome Powell, in his press conference following the central bank’s May 3-4 policy meeting, dismissed talk of 0.75-percentage-point rate hikes and expressed confidence policy makers could rein in inflation in a measured way while guiding the economy to a “soft or softish landing.”
U.S. stock indexes surged following Powell’s press conference, before later plunging. The Dow Jones Industrial Average was up more than 900 points on the day of Powell’s comments, but has since fallen by more than 1,500 points as investors consider the Fed’s tightening efforts and inflation—along with the Russia-Ukraine war and Covid-19 lockdowns in China.
“The upcoming inflation print could sway expectations for how monetary policy will be adjusted going forward. If the latest April data does show a beginning of lower CPI and PPI rates of inflation, the stock markets will sing a brighter tune,” wrote John Blank, chief equity strategist/economist at Zacks Investment Research, referring to Wednesday’s CPI release as well as Thursday’s release of the producer-price index, which measures inflation at the wholesale level.
The Labor Department is slated to release the CPI at 8:30 a.m. Eastern time.
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