Global investors will watch the next batch of US CPI data with bated breath. This week, the Bureau of Labor Statistics releases the latest US inflation data for April. The April 2023 CPI statistics will be released on May 10, 2023 at 8:30 AM Eastern Time or 6:00 PM IST. April’s US inflation report is expected to provide clues if the Federal Reserve pauses rate hikes next month. The FOMC will meet on June 13 and 14 to decide on policy rates.
Annual inflation was 5% in March, while monthly price increases were only 0.1%. Despite falling from a ten-year high of 9.1%, inflation remains well above the central bank’s target rate of 2%. Core inflation numbers are more vital than headline inflation numbers. The core inflation index, excluding food and energy and closely monitored by the Fed, rose 5.6% in March.
Markets expect inflation to remain unchanged at 5% in April. This could be mainly due to higher oil prices in April. OPEC+’s April 2 announcement of an unexpected drop in crude oil production sent oil prices skyrocketing.
Continued inflation and rising core inflation data could lead to a market downturn. In such a circumstance, the Fed will be forced to continue its aggressive tightening policy, and more bad news for the banking sector and the economy may follow. If inflation remains low, the Fed may decide to pause and examine the economic implications of no rate hike before deciding on rate cuts.
The focus for the coming months will be the June FOMC meeting. The US Fed is expected to take a breather and pause any future rate hikes in June if new data supports its view. The Fed expects early rate hikes to be delayed, so a delay could allow them to scrutinize the data. Federal Reserve Bank of New York President and Chief Executive Officer John C. Williams is expected to speak a day before US CPI data is revealed on Wednesday.
Fed Chairman Powell stressed last Thursday that policy decisions would be “driven by incoming data.” Meanwhile, the Chinese bureau of statistics will release inflation estimates on Thursday. In addition, the Fed’s Senior Loan Officer’s quarterly poll found that criteria for commercial and industrial lending have tightened, which could adversely affect economic growth.