(Bloomberg) --Here are five key takeaways from the April US CPI report released Wednesday:
- US inflation ran slightly cooler than expected in April, good news that reinforces the markets' view that the Federal Reserve will pause its rate hikes in June. The consumer price index rose by a below-forecast 4.9% from a year earlier, the first sub-5% reading in two years, a Bureau of Labor Statistics report showed.
- Both overall and core (excluding food and energy) CPI rose 0.4% for the month, as expected. While that's too hot for the Fed, which is aiming for a 2% inflation rate based on another metric, it is a moderation from the overheated rates of last year. Some economists are predicting price increases will be running at 3% or lower by year's end.
- Shelter costs, which are the biggest services component and make up about one-third of the overall CPI index, rose 0.4% last month, the smallest in over a year. Prices for airfares, hotel stays and new cars declined. Looking at cities, the biggest gain was in Miami-Fort Lauderdale-West Palm Beach area, at 9% over the year.
- Fed Chair Jerome Powell has been focused on so-called supercore CPI – core prices excluding housing – because he sees this segment of the services industry affected by a tight labor market. There was good news there, with those prices rising just 0.1%. Markets are pricing in only a tiny possibility of a June hike, though Fed watchers caution it's too soon to declare the rate hiking cycle over.
- Markets took the report positively. Stocks extended premarket strength into the open. The S&P 500 jumped 0.8% at the start of the trading day, while the Nasdaq 100 rose 1%. Treasury yields dropped across the curve, and Bloomberg's dollar gauge moved lower.
--With assistance from Peyton Forte.
© 2023 Bloomberg L.P.
