HomeContributorsFundamental AnalysisUS Inflation Rates Edged Down in April But Remained Near 2%

US Inflation Rates Edged Down in April But Remained Near 2%

Highlights:

  • The all items index rebounded by 0.2% in April but the year-over-year rate slipped to 2.2% from 2.4% in March.
  • Higher energy prices (+9.3% from last year) continued to boost headline inflation.
  • Consumer prices excluding food and energy rose by less than expected (+0.1%) following a 0.1% dip in March that was just the second monthly decline in decades.
  • Rising shelter costs offset declines in a number of other core components in April.
  • Year-over-year core inflation slipped to a 1½-year low of 1.9%.
  • Prices for wireless telephone services declined again in April; a more substantial 7% drop in March shaved about 0.1 percentage point off of headline inflation.

Our Take:

Inflation has come off the boil in the last two months, though we don’t see the latest data standing in the way of a June rate hike. Following last week’s labour market report that showed a rebound in job growth and 4.4% unemployment rate, there seems to be a bit more urgency from Fed officials to continue removing accommodation. Whereas, a year ago, a slow start to the year led to a more cautious approach from the Fed, policymakers now seem more than willing to look through soft Q1 GDP. Inflation and wage data isn’t yet signaling a sharp tightening in monetary policy is required, but with unemployment at a 16 -year low and inflation hovering around 2%, we expect the Fed will proceed with gradual rate hikes rather than risk falling behind the curve. We think a June rate hike is order, as well as further tightening over the second half of the year.

RBC Financial Group
RBC Financial Grouphttp://www.rbc.com/
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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