CPI YoY: +3.5% vs. 3.4% est
- Both the headline and core CPI, which strips out food and energy, climbed by 0.1 percentage point more than forecast, with each coming in at 0.4%. For the core, that marked the third straight month of 0.4% readings, the hottest such string since early last year. On a year-on-year basis, headline CPI accelerated to 3.5%, while the core held at 3.8%, with both readings exceeding economists’ forecasts.
- Housing and gasoline costs contributed more than half of the increase in the overall CPI, with shelter prices again proving a stubborn element of the inflation battle. While Fed policymakers have expected shelter costs to ease, there’s still no sign of that, with rent and owners’ equivalent rent both up 0.4%.
- The so-called supercore services gauge, which strips out housing, accelerated to a 0.65% monthly gain, on top of 0.47% and 0.85% readings the previous two months. Car insurance again proved a notable impetus here, along with medical-care costs.
- Yet-another hot inflation report challenged those still expecting the Fed to start cutting interest rates in June. Morgan Stanley economists said that, depending on Thursday’s producer-price report, the CPI “tilts the Fed toward a later start” than June. Paul Ashworth at Capital Economics was blunter: it “kills June rate-cut hopes.”
- Treasuries and stock futures tumbled, and the dollar climbed. Two-year Treasury yields soared 23 basis points to 4.97% as of 9:15 a.m. in New York, S&P 500 futures were down 1.5% and the Bloomberg Dollar Spot Index was up 0.6%. Swaps showed only 50 basis points worth of Fed cutting for this year.