Will inflation persist?
“US consumer prices rose by more than forecast in April, indicating inflation will persist at elevated levels for longer and keeping the Federal Reserve on the path of aggressive interest-rate hikes.
The core consumer price index, which excludes food and energy, increased 0.6% from a month earlier and 6.2% from April 2021, according to Labor Department data released Wednesday. The broader CPI rose 0.3% from the prior month and 8.3% on an annual basis, a slight cooling but still among the highest readings in decades.
Some of the largest contributors to the monthly increase included shelter, food, airfares and new vehicles.
The core CPI topped all estimates in a Bloomberg survey of economists, which had a median projection of 0.4%.
The headline gauge was seen climbing 0.2%. Treasuries declined, erasing earlier gains, as two-year yields rose to as high as 2.74% after the figures. Stock futures fell. Traders steepened bets for the path of Fed moves, increasingly betting on a fourth straight half-point rate hike in September.
“The peak of inflation may be behind us, but today’s CPI report points to a long, slow descent or maybe even a plateau around 8%,” said Robert Frick, corporate economist at Navy Federal Credit Union.
While the latest report shows that US inflation has likely peaked, the figures underscore the breadth of price increases in the economy and, when combined with firm wage growth, suggest high inflation will persist for some time.
Despite the Fed raising interest rates, including the biggest rate hike since 2000 last week, global headwinds like China’s lockdowns and resilient services’ demand may mean a slow road to the central bank’s 2% goal.
Fed Chair Jerome Powell signaled last week that officials are open to several half-point increases in the central bank’s benchmark rate in the months ahead. The CPI will help shape estimates for the April personal consumption expenditures price index, the Fed’s preferred inflation gauge, which will be released on May 27.”