play2earnnftgames| The flames of interest rate cuts are burning! U.S. core CPI annual rate fell to its lowest level in nearly three years, and U.S. stocks hit new highs

Before Wednesday local time, the U.S. Department of Labor released its consumer price index for April, with a nominal CPI annual rate of 3. 5%.Play2earnnftgames.4%, in line with expectations; the monthly rate of CPI grew by 0.3%, slightly lower than the expectation of 0.4%; and the more critical annual rate of core CPI further fell to 3.6%, which was in line with expectations and fell to the lowest level since April 2021. (annual rate of core CPI in the United States, source: tradingeconomics)

Although the inflation figure for April remained above 3 per cent because the CPI data for the first three months of this year exceeded expectations, "no shock" alone was enough to make US stock investors and international investors who had "suffered a strong dollar for a long time" celebrate collectively.

After the opening of trading on Wednesday, the three major indexes of US stocks, driven by CPI data, rose nearly 0.5%, the S & P 500 and the Nasdaq hit new record highs, and the Dow is expected to hit a new closing high.

The dollar index plunged synchronously, the dollar / yen fell nearly 1% in the day, and spot gold rose nearly $20 in a short time, hitting $2380 an ounce at one point. Ten-year Treasury yields continued to fall back to where they were in early April in response to increased expectations of a Fed rate cut.

Based on the confidence brought by CPI data, the swap market's forecast probability of the Fed's first interest rate cut in September also rose.Play2earnnftgamesIt is 70%, and the probability of two interest rate cuts by the end of the year is also more than 50%. (source: CME) Service price growth is still high

The Labor Department report shows that the housing prices repeatedly stressed by Fed officials are still a big problem. In the CPI composition in April, home prices, with a weight of nearly 1/3, rose 0.4 per cent from a month earlier and 5.5 per cent from a year earlier. For the fed, which is trying to bring inflation back to 2 per cent, a 5 per cent increase is hardly reassuring to Mr Powell.

At the same time, due to fluctuations in international oil prices, energy prices rose 1.1 per cent month-on-month in April (2.6 per cent year-on-year), which is also a key component of overall CPI. The price of another transportation service that has attracted a lot of attention in the service sector continued to rise 0.9% in April, bringing the year-on-year increase to 11.2%. The prices of new and used cars, which had driven up inflation during the epidemic a few years ago, continued to fall month-on-month in April.

Of course, the Fed had no expectation that inflation would fade quickly. Mr Powell said at an event in the Netherlands on Tuesday that reducing inflation would not be a smooth road and that the Fed would need to "wait patiently for restrictive policies to work".

Also on Wednesday morning, retail sales figures for April released by the Commerce Department, against the backdrop of a slight revision to + 0.6 per cent in March, still returned to zero month-on-month growth in April, significantly below market expectations of 0.4 per cent growth. The analysis points out that in a high inflation environment, with the rise in gasoline prices, consumers have to cut back on consumption in other areas.

Combined with the latest inflation data, the real income of US workers adjusted for inflation fell 0.2 per cent month-on-month, while the year-on-year figure rose only 0.5 per cent. First-line interpretation

Nick Timilaus, a well-known macro journalist and known as the "Fed mouthpiece", said after the release of the data that the April report showed that inflationary pressures had eased, which would make Fed officials more comfortable to keep existing policies unchanged at next month's policy meeting.

Timilaus also stressed that given the "stress disorder" caused by the usual data in the previous three months, it is difficult to offset the previous three bad data by looking at the April data alone. an additional two months of data may be needed to consolidate officials' confidence in falling inflation. So the Fed is unlikely to be ready to cut interest rates until its September meeting. But the good news is that the April data at least curbed the risk of a shift in Fed policy.

Cayla Seder, a macro cross-asset strategist at State Street, agrees that both CPI and retail sales data help confirm that monetary policy transmission is working and should support risky assets. But to really consolidate the confidence that a rate cut is coming, we may need to see today's data continue, but today may be the beginning of this trend.

Seema Shah, chief global strategist at Principal Global Investments, also warned that weaker-than-expected retail sales data needed to be closely watched and that a cooling in consumer spending was a good thing, but if it turned into a deeper slowdown, it could herald economic problems that some markets do not want to see.

Edit / new