US: Core CPI in April suggests sticky inflation ahead of June FOMC meeting – TDS

Data from the US released on Wednesday showed a decline in the annual Consumer Price Index in April in line with expectations. Analysts at TD Securities point out that April core CPI still suggests underlying inflation is likely to remain sticky ahead of the June FOMC meeting; they are of the view that a final 25bp rate increase to 5.25%-5.50% remains on the table. 

Key Quotes: 

“Consumer price inflation matched consensus expectations in April, with headline CPI rebounding 0.4% m/m. Prices in the core segment stayed firm, also advancing at a firm 0.4% m/m pace for a second consecutive month. In our view, the path for core inflation over the next few months will continue to be determined by the tug-of-war between the newfound momentum in goods prices and slowing services inflation.”

“With April core CPI prices still suggesting underlying inflation is likely to remain sticky as we head into the June FOMC meeting, we are of the view that a final 25bp rate increase to 5.25%-5.50% remains on the table. However, we also acknowledge that the FOMC's decision has become especially data-dependent, with activity/banking related data gaining more prominence on the Fed's dashboard post-SVB.”