Analysis

Does the US inflation report really matter?

Inflation reports may take on less significance moving forward

Sumit Roy

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Someone joked recently that every Federal Reserve meeting of the past year was hyped up to be the most important milestone in modern history. You could say the same for every inflation report over the same time frame.

Every report on the Consumer Price Index (CPI) or PCE deflator was deemed as the one that signalled the end of inflation or resulted in the assumption that the Fed was nowhere close to solving the inflation problem.

But just like Fed meetings might take on less significance going forward (especially if the Fed has truly hit pause on further rate hikes), so too might inflation reports.

Growth in consumer prices seems to have stabilised in recent months, with various core measures registering annualised gains in the 4% to 5% range. That is, of course, unacceptable to a Fed that has committed itself to bringing inflation back down to its 2% target.

But stability, even at a relatively high level, gives the US central bank some breathing room and time to assess whether its slew of rate hikes have been enough to gradually push inflation down.

It also means investors have fewer reasons to agonise over every inflation report in the same way they did in 2022.

That includes this Wednesday’s CPI report, which measures consumer prices for the month of April. Economists surveyed by Bloomberg expect the headline CPI to have risen by 0.4% month-over-month and 5% year-over-year.

Meanwhile, core CPI, which excludes food and energy prices, is anticipated to have risen by 0.3% month over month and 5.5% year-over-year.

That includes this Wednesday’s CPI report, which measures consumer prices for the month of April. Economists surveyed by Bloomberg expect the headline CPI to have risen by 0.4% month over month and 5% year over year.

Meanwhile, the core CPI, which excludes food and energy prices, is anticipated to have risen by 0.3% month over month and 5.5% year over year.

This article was originally published on ETF.com

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