US Inflation Dips in April 2024: Rate Cut Expectations Rise

In April 2024, US inflation rose less than expected signaling a downward trend. According to the Bureau of Labor Statistics, Consumer Price Index or CPI increased by 0.3% sequentially. Annually, CPI rose by 3.4% following 3.5% rise in March. This marks first month of slowing annual data since January 2024 after peaking at 9.1% in June 2022.

The core CPI which excludes food and energy costs and is considered a better indicator of underlying inflation also rose by 0.3% in April. This broke three month streak of above forecast readings easing concerns about persistent inflation. Annually, core CPI increased by 3.6%, smallest year on year gain since April 2021 down from 3.8% in March.

Sector-Specific Changes

Shelter prices largest service category in the CPI increased by 0.4% for the third consecutive month. This category includes rent and owners’s equivalent rent, latter of which also rose by 0.4%. High housing costs remain a major factor in persistent inflation both in the US and other developed economies.

Gasoline prices surged by 2.8% contributing substantially to overall CPI increase.

Conversely, food prices remained unchanged. Especially supermarket prices dropped by 0.2% with eggs experiencing a major 7.3% decline. Prices for meat, fish, fruits, vegetables and non alcoholic beverages decreased while cereals, bakery products and dairy prices saw slight increases.

Other Categories like motor vehicle insurance increased by 1.8%, healthcare costs rose by 0.4% and prices for personal care, recreation and education increased. Used car and truck prices dropped for second month and new motor vehicle prices declined for third straight month.

Macroeconomic Impact and Federal Reserve Response

The data indicates that inflation is cooling strengthening Wall Street's expectations for interest rate cut by US Federal Reserve in September. Retail sales were flat in April suggesting cooling domestic demand which aligns with Fed's goal of weakening demand to control price pressures.

Fed Chair Jerome Powell emphasized need for patience stating that restrictive policies need time to work. Despite positive inflation data some policymakers remain cautious not expecting to cut rates this year. Central bank's benchmark interest rate has been held steady at 5.25% - 5.50% since July 2023 after raising it by 525 basis points since March 2022.

Market Reactions and Expert Opinions

Economists predict that inflation will continue to decline moving towards Fed's target. April CPI data has increased probability of rate cut in September to 73%. Experts like Amit Goel from Pace 360 and Yogesh Kansal from Appreciate highlight gradual but positive impact on inflation stressing need for sustained downward trends before Fed can confidently move toward rate cuts.

Final Words

April 2024 CPI data provides hopeful sign for US economy suggesting that inflation is easing. Still Federal Reserve remains cautious requiring consistent evidence of this trend before making any rate cut decisions. Next CPI data release on June 12 will be crucial for future policy directions.