Today’s “Inflation Week” – A Quick, Fun Rundown
We’ve had a duo of data releases that were hotter than a Southern summer, so that’s already giving our markets a bit of a hawkish vibe before the big CPI drop‑in.
New York Fed Teases the Future
- 1‑year outlook: 3.3 % (up from 3.0 %)
- 3‑year outlook: 2.8 % (down a hair from 2.9 %)
- 5‑year outlook: 2.8 % (now 2.6 %)
There was a mild buzz in the front‑end Treasury curve, but remember: people tend to guess inflation like they do weather forecasts – it’s usually not very accurate. The numbers largely move with the real inflation, not with dreams of a price‑free future.
Producer Prices Got Even Hotter
Both headline and core PPI popped by 0.5 % month‑over‑month in April. That’s a 2.2‑year‑over‑year rise for the headline figure and 2.4 % for core. Surprise? Sure, but hold the applause – the previous month’s print had a big revision, pulling it down by 0.3 percentage points. So the 0.3‑point beat in April is basically the same as last month’s adjusted figure – a short‑lived buzz‑worthy spike.
What’s the Verdict Before the CPI Drop?
Honestly, both PPI and Fed expectations look more like random noise than a clear signal. The link between a PPI win and a CPI surprise isn’t a strong one.
The risks for April’s CPI are pretty much even‑dried. Gasoline prices keep climbing, food inflation is a bit chill, and used‑car prices are falling like a rock.
But remember, the headline CPI has consistently outpaced expectations for three months straight, so many eyes are on a possible beat of the 3.4 % median guess.
Market Forecasts: The Numbers
- Year‑over‑year: 3.41 % (slightly hotter than consensus)
- Month‑over‑month: 0.36 % (slightly cooler than consensus)
When the Numbers Play Their Game
- Hotter‑than‑expected: Stocks & bonds dip, US dollar edges up – more surprise, steeper the move.
- Cool‑than‑expected: The opposite happens – but our Fed pricing is firmly hawkish. With just 40 bp of easing expected by year‑end, a cool print could spark a bigger swing.
In sum, the Fed wants another hike but is also ready to cut if the labor market shows signs of slipping. That’s the tightrope we’re walking as CPI drops in.
