Thursday’s US CPI report is expected to surge to 2.0% from 1.5% y/y. For some, the jump points to a resurgence in inflation and a validation of fed tapering.
But the WSJ explains that the jump will be largely a seasonal skew in the y/y number because April 2013 was so weak. Last April temporary budget cuts crimped payments, especially in healthcare and led to -0.2% decline. Because prices are measured against that April, the headline number is likely to be higher than the trend.
A late Easter could also boost April prices (in 2013 Easter was in March).
April CPI
A high CPI reading is likely to boost the US dollar, but beware that the effect will reverse over the following two months.
