- Prior was +6.0%
- m/m CPI +0.1% vs +0.2% expected
- Prior m/m reading was +0.4%
- Real weekly earnings -0.1 % vs -0.4% prior
Core inflation :
- Ex food and energy +5.6% vs +5.6% y/y expected
- Prior ex food and energy +5.5%
- Core m/m +0.4% vs +0.4% exp (unrounded +0.385%)
- Prior core m/m +0.5%
- Shelter rose +0.6% vs +0.8% prior
- Services ex shelter 0.0%
- Core services ex shelter +0.4% vs +0.43% prior
More details m/m:
- Food 0.0%
- Energy -3.5%
- Shelter: +0.6%
- New vehicles +0.4%
- Apparel +0.3%
- Medical care services -0.5%
Ahead of the release, the market was pricing in a 75% chance of a 25 bps hike on May 3 and that's ticked down to 67%. Market participants who think they're near the end of the hiking cycle will feel increasingly comfortable now. There is plenty of good news here with the headline undershooting and the important parts of core inflation also falling.
The US dollar is lower across the board here as it begins to look like the Fed is getting the upper hand on inflation. I think a good chunk of that is due to the reversal in energy prices but that certainly buys the FOMC some time for higher rates to bite into core inflation and for the lagged shelter numbers to work their way through.
The dollar is down around 60 pips across the board on this and US 2-year yields are down 15 bps in a front-end led rally in fixed income. S&P 500 futures are up 39 points.