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Inflation Cooling: U.S. Consumer Prices Show Signs of Relief

Daniel Kim Views  

AFP·Yonhap News

The major indices of the US stock market are showing strength on May 15 (local time) amid a slowdown in the rise of the US Consumer Price Index (CPI).

The US Department of Labor announced on the same day that the April CPI increased by 3.4% compared to last year. Last month’s CPI matched the expert estimate compiled by the Wall Street Journal (WSJ). This is a decrease of 0.1 percentage points from the previous month and the first time this year that the increase has slowed.

The Labor Department explained that the rise in housing costs (up 0.4% from the previous month) and gasoline prices (up 2.8% from the last month) contributed to more than 70% of the consumer price increase compared to the previous month.

The US consumer price inflation rate has been showing a slowdown trend after peaking at 9.1% in June 2022. Since then, it has fluctuated in the early to mid-3% range.

US Bureau of Labor Statistics (BLS) data
US Bureau of Labor Statistics (BLS) data

The core CPI, which excludes volatile energy and food prices, recorded its lowest figure since April 2021 at 3.6% year-on-year. It decelerated from a 0.4 percentage point increase in March to a 0.3 percentage point increase month-on-month.

The WSJ stated, “This inflation data suggests that prices and economic activity are not accelerating.” Although this figure alone is not enough to change the calculations of Federal Reserve (Fed) managers about the timing and start of interest rate cuts that affect the overall cost of borrowing in the economy, it has quelled concerns that they may need to open the door more widely to potential interest rate hikes by the end of the year.

During a discussion hosted by the Netherlands Foreign Bank Association in Amsterdam the previous day, Jerome Powell, Chairman of the Federal Reserve, said, “We anticipate that inflation will return to the lower levels seen last year on a month-to-month basis.” Still, he also mentioned, “The probability of our next move being a rate hike is low.”

Daniel Kim
content@viewusglobal.com

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