“US CPI Shows Signs of Easing Price Pressures, Giving Fed Room to Halt Rate Hikes in June”

April’s consumer price index (CPI) showed signs of easing price pressures, giving the Federal Open Market Committee (FOMC) room to halt rate hikes at its June meeting. But inflation is still too high for policymakers to consider cutting rates.

US CPI hints at slowing inflation, giving Fed room to stop rate hikes (3)

The US headline CPI rose 4.9% in April from the same month last year, the first time in two years that the growth rate fell below 5%. Growth in core CPI excluding food and energy also slowed slightly. But more important for the FOMC will be slowing growth in some key service costs. Air fares and hotel costs have fallen.

“A cursory glance suggests that monetary policy is leaning toward the possibility of even slightly tighter,” said Gregory Daco, chief economist at Ernst & Young (EY). But when you look at the details, most of the content points to an increasing likelihood that rate hikes will be halted.”

The market is still expecting a rate cut later this year. This is due to concerns that the economy will slow down significantly due to the tightening of credit following the bankruptcies of multiple banks. But April’s CPI data suggests it is still too early for the authorities to declare victory in the fight against inflation.

“It’s not necessarily reassuring, but it’s not shocking enough to make Fed officials suggest another rate hike in June,” said Anna Wong, chief U.S. economist at Bloomberg Economics. “However, the slow pace of declines in core inflation highlights how unlikely a rate cut is this year,” she said.

news-rsf-original-reference paywall">Original title:Fed Gets Room to Hold in June as Inflation Shows Sign of Cooling(excerpt)