Markets were rattled in January when the CPI data came in higher than expected, and Fed officials shifted their rhetoric afterward to a more cautious tone about easing policy. Recent economic data, including strong job numbers, has already fueled inflation concerns, pushing the 10-year Treasury yield to approximately 4.80%, its highest level since November 2023. Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Next CPI Report: What to Expect
- Inflation hit a four-decade high in 2022, prompting the Federal Reserve to embark on its most aggressive campaign of interest rate hikes since the late Carter and early Reagan administrations.
- Markets expect the president’s softening position to lead to less of a chance of interest rate cuts this year.
- He added, “As such, both the Fed and global investors will still need to be a bit more patient before they can properly assess the impact of the trade uncertainty on consumer prices.”
- Shelter prices again were the main culprit in pushing up the inflation gauge.
- The lower inflation gets, the more reason officials at the Fed, who set the central bank’s influential fed funds rate, will have to cut the rate sooner, pushing down borrowing costs.
Barclays economists expect April CPI to be up 0.3% month over month and 2.3% year over year. Either way, the FOMC was quick to cut rates in late 2024 but appears likely to keep the federal funds rate unchanged when it next meets in June. The Fed relies more on the Commerce Department’s inflation gauge for policymaking, though the CPI figures into that index. The BLS on Thursday will release its April reading on producer prices, which is seen as more of a leading indicator on inflation. Since the China developments, the market has pushed out the first cut to September, with just two likely this year as the central bank feels less pressure to support the economy and as inflation has held above the Fed’s 2% target now for more than four years.
Inflation rate rose by 2.3% in April, CPI report shows. Here’s what the data means.
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Core inflation is expected to stay at an annual rate of 2.6%, the same as in March, according to the median forecast. That’s especially important because the Fed uses core inflation to assess whether it’s hitting its annual 2% inflation goal. Although the first three months of the year showed consumer prices rising more than expected, a relatively tame report in April raised hopes that the uptick was more of a fluke than a genuine resurgence. Should cooler inflation continue, it could encourage officials at the Federal Reserve to cut the central bank’s key interest rate later in the year. That would mean prices rose 3.4% over the year, the same year-over-year rate as April. Economists expect that prices across a broad spectrum of goods and services rose 0.4% on the month, just ahead of the January pace for 0.3%, according to the Dow Jones consensus.
Powell and other Fed officials have said they’re in no hurry to make cuts since the economy isn’t yet cracking under the weight of high interest rates. “It will likely take similar well-behaved inflation data in August (or a higher jobless rate) to assure a majority of voting members on the FOMC that inflation is moving convincingly to the 2.0% target,” wrote Priscilla Thiagamoorthy, senior economist at BMO Capital Markets. Federal Reserve officials will be closely looking at the inflation data, and at least one central banker said this weekend she still isn’t confident that inflation is moving lower. Below please find a selection of commentary from economists, strategists and other market pros on what to expect from the next CPI report, sometimes edited for clarity or brevity. The news Tuesday was good for inflation, and investors hope it will get even better Wednesday when the Labor Department releases the July consumer price index report. He added, “As such, both the Fed and global investors will still need to be a bit more patient before they can properly assess the impact of the trade uncertainty on consumer prices.”
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Explore solutions to challenges that low- and moderate-income communities face. Network with community development practitioners and policymakers from across the country. Download our spreadsheet to see all the inflation expectations model’s how to start forex trading for beginners outputs going back to 1982. There’s more, but the bottom line is that the Fed believes the PCE index has some critical advantages over CPI when it comes to formulating monetary policy. That’s why the Consumer Price Index, or CPI report, has become one of the stars of the economic calendar.
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- There’s more, but the bottom line is that the Fed believes the PCE index has some critical advantages over CPI when it comes to formulating monetary policy.
- The unemployment rate has now risen to 4.3%, a 0.8 percentage point increase over the past year that has triggered a time-tested recession flag known as the Sahm Rule.
While that sentiment has dissipated, there’s still worry about the Fed being slow to ease, just as it was slow to tighten when inflation began to escalate. Mr. Trump has also announced tariffs, such as his April 2 “Liberation Day” levies, and then backed off from them. On April 9, he hit the pause button with a 90-day delay, scaling back the tariffs to a 10% rate. On Thursday, the Bureau of Labor Statistics will release the Producer Price Index for April, providing a look at wholesale-level inflation. Economists anticipate that tariffs likely will make a bigger splash on physical and virtual store shelves in May and June. However, data set to be released later this week could give a glimpse as to what, if anything, could be coming down the pike.
The April figure is 79% higher than the same month a year earlier, when the price averaged $2.86 per dozen. The average price for a dozen Grade A eggs dropped 12.7% to $5.12 in April, marking the first month-to-month decline in egg prices since October 2024. Egg prices sank 12.7% for the month, reflecting declines seen on the wholesale side as the industry starts to recover from a deadly bout of avian flu. The average price of a dozen Grade A eggs fell from $6.23 to $5.12, BLS data shows. The April 2025 Consumer Price Index (CPI) print from the Bureau of Labor Statistics showed that inflation cooled further in April.
How Will the Inflation Report Affect the Fed’s Interest Rate Decisions?
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That said, XAIU/USD remains on the defensive as market focus shifts to the FOMC Minutes amid continuous uncertainty on the US trade front and rising geopolitical worries. If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has blackbull markets review no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet. With the increase in CPI, real average hourly earnings were flat for the month and up 1.4% from a year ago. “The July CPI report is likely to further the case that inflation is quieting down even if it has not yet returned to the Fed’s target,” Wells Fargo economists said.
What is the expected CPI: A Strong CPI Report Could Signal No Rate Cuts
Therefore, it is closely watched by investors and members of the Federal Reserve (Fed). The difference between the January headline CPI and the core CPI was driven primarily by higher energy and food prices. Rising gasoline prices likely put a floor under inflation in February, potentially reinforcing the Federal Reserve’s decision to take a go-slow approach with interest rate reductions. Much of the expected decline in inflation is due to prices for several key items in household budgets staying flat or even falling.
However, a few key core prices, including for used cars, may have increased notably, Ian Shepherdson chief economist at Pantheon Macroeconomics, predicted in a commentary, based on data from JD Power. Economists view core inflation as a more reliable indicator of the trajectory of inflation because prices for food and gas often go up and down for reasons that have nothing to do with broader inflation trends. However, that likely won’t be true for much longer, as merchants begin to pass on the cost of the new import taxes to consumers, Goldman forecasted. Economists expect the headline CPI to increase by 2.9% year-over-year, while core CPI, which excludes volatile food and energy prices, is projected to rise by 3.3%. A strong CPI reading could prompt investors to push back expectations for interest rate cuts into 2026, indicating ongoing inflation risks that the Federal Reserve will need to address.
The gauge is weighted toward items such as housing and insurance, and Fed officials are hoping that shelter costs decrease through the year, taking some pressure off the cost of living gauges. Gas prices fell on a seasonally razor pages adjusted basis while grocery prices are also expected to have moderated, as evidenced by several major retailers announcing promotions or price cuts, keeping a lid on grocery bills, economists at Wells Fargo Securities wrote in an analysis. What is the expected CPI, as we approach the release of the upcoming Consumer Price Index (CPI) report, the implications for monetary policy are becoming increasingly significant.Investors are eagerly awaiting the release of the U.S. This crucial data will provide insights into inflation trends and could significantly influence market sentiment moving forward. And with some upside risks to inflation, I still see the need to pay close attention to the price-stability side of our mandate while watching for risks of a material weakening in the labor market,” Federal Reserve Gov. Michelle Bowman told the Kansas Bankers Association on Saturday. Another benign inflation report “makes the Fed completely comfortable that they can shift their focus away from inflation and toward labor,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.
Forecasters are anticipating January’s report to more than wipe out an unwelcome inflation uptick in December.This and other inflation reports over the next few months could be key in determining how soon, and how quickly, the Federal Reserve will cut its benchmark interest rate. Falling energy prices and a slowdown in food price increases could reduce the overall inflation rate, economists at RBC said in a commentary. The Federal Reserve’s policy-setting committee has said they’re looking for economic data—especially inflation reports—to show that consumer prices are firmly on the path down to a 2% annual rate before they’ll cut interest rates. The central bank has maintained its key fed funds rate at a 23-year high since last July, pushing up borrowing costs for mortgages and other loans, in hopes of slowing the economy and stifling inflation.