PRIMER: US April CPI to be released at 13:30BST/08:30EDT; the consensus expects the annual rates to cool again

EXPECTATIONS:

• Headline consumer prices are seen rising +0.2% M/M in April (prev. +1.2%), while annual consumer prices are seen easing to 8.1% Y/Y from 8.5%. Seasonally adjusted gasoline prices fell around 7% in the month, which should drive the slowdown in the headline metrics.


• Core consumer prices are expected to rise +0.4% M/M (prev. +0.3%), and the annual rate is seen cooling to 6.0% Y/Y from 6.5%. Used vehicle prices are likely to ease for the third straight month. Shelter inflation is expected to remain elevated, services inflation is seen remaining high amid further reopenings in April as well as the consumer shift in spending from goods towards services.

HAS INFLATION PEAKED?

• Analysts will be watching the data to see if the trends in the March CPI and PCE data – where annualised rates eased, leading to many 'peak inflation' calls – will be seen again.


• Swiss bank Credit Suisse expects "the Y/Y readings in both headline and core CPI inflation likely peaked in March, but inflation will still run well-above the Fed’s 2% target," and warns that although "Chair Powell has laid out a base case of 50bps rate increases for the next two FOMC meetings, a significant upside surprise could leave room for more-aggressive tightening."


• However, some warn that inflation may have room to tick up. The S&P Global PMI data sets, for instance, recently noted that inflationary pressures intensified further in April, where input prices and output charges increased at the sharpest rates on record. S&P said material and labour shortages, alongside greater transportation costs drove the rise in prices. "Subsequently, services firms increased efforts to passthrough higher cost burdens on to clients through hikes in selling prices," adding that "the pace of charge inflation accelerated notably."

BIDEN WILL COMMENT ON THE DATA:

• US President Biden will again speak on inflation today in wake of the April data release; schedules suggest that he will deliver remarks at 14:15EDT/19:15BST.


• Biden often tailors these comments towards a retail audience, rather than financial market participants, and accordingly, his tone is expected to be softer, and he is expected to highlight actions that his administration are taking to manage cost pressures.

11 May 2022 - 08:49- Fixed IncomeData- Source: Newsquawk