U.S. April CPI Figures Not Worse Than Expected, and That Just May Be Sufficient for Fed Policy to Pause
May 10, 2023
The dollar fell overnight by 0.6% against the yen, 0.3% relative to the euro, 0.2% vis-a-vis the Australian and New Zealand currencies, and 0.1% versus the British pound.
Ten-year sovereign debt yields are down today by six basis points in the United States, five bps in France and Italy, four bps in Germany and the U.K., and a single basis point in Japan.
U.S. stock futures had eased prior to the consumer price data release, but the Nasdaq and S&P 500 rose 0.9% and 0.6% in the first hour of trading. In overseas equity trading, share prices closed down 1.2% in China, 0.6% in Taiwan, 0.5% in Hong Kong and South Korea, and 0.4% in Japan. European markets are modestly lower.
WTI oil has fallen 1.4%, while the price of Bitcoin has risen 2.1%. Gold is steady.
Make no mistake, U.S. consumer price figures do not represent an all clear sign for inflation. Shelter, food and services showed respective price increases from April 2022 of 8.1%, 7.7% and 6.8%, and the 12-month 5.1% drop in the energy component was somewhat smaller than that in March. But overall CPI inflation of 4.9% was down from 5.0% in March and a tad under analyst expectations. 4.9% represents a drop from last June’s cyclical peak of 9.1% and the lowest point in two years. Core CPI inflation of 5.5%, however, has declined much less from its 2022 peak of 6.6% in September. Altogether, the data were not worse than anticipated, and that may be enough for the FOMC not to raise its interest rate target further at the June policy review.
In other price news reported around the world this Wednesday,
- German CPI inflation in April was confirmed at the preliminary estimate of 7.2%, which is down from 7.4% in March, 8.7% in February, and a record 8.8% recorded in in October and November of last year. Food costs (17.2%) remain very problematic, but service sector price inflation of 4.7% is lower than in the United States.
- Norwegian CPI inflation slid to 6.4% last month from 6.5% in March and 7.5% last November, while producer price inflation in Norway of 15.3% last month was considerably less than the figure in March and what analysts had been forecasting.
- In Hungary, whose prime minister U.S. Republican leaders simply adore, CPI inflation of 24.0% in April again exceeded the 20% threshold.
In the former Soviet Republic of Georgia, interest rate easing commenced today. The National Bank of Georgia’s policy rate had been cut in the early months of 2020 by 100 basis point in total to 8.0% by May of that year. The rate was raised 250 basis points during 2020 and topped by an additional 50-basis point increase in March 2022. Today’s cut reverses that final increase, returning the rate to 10.5%, which still exceeds the pre-pandemic level by 150 basis points. Georgian consumer price inflation has receded from a 139-month high of 13.9% in December 2021 to a 28-month low of 2.7% last month. According to officials at the National Bank, “amid high uncertainty and a long deviation of inflation from its target, it is expected that the National Bank of Georgia, over the medium term, will reduce the policy rate only gradually,in order to ensure the stabilization of inflation around its target with the tight monetary policy.”
The National Bank of Poland also reviewed monetary policy this week, concluding today with a decision to leave its policy interest rate again unchanged at 6.75%. The rate had been lifted by 140 basis points during 2021 and a further 500 basis points in 2022 but not after September. CPI inflation in Poland had subsided from a 26-year high of 18.4% in February to an 11-month low of 14.7% as of April.
Japan’s index of leading economic indicators fell 0.7% to a 2-month low in March, and the trend designation attached to the index of coincident economic indicators was “weakening” for a fourth straight month.
Italian industrial production fell 0.6% on month and 3.2% on year during March. Belgian industrial production that month dropped 0.2% on month and by 2.2% from a year earlier. Brazilian industrial production went up 1.7% on month and 0.9% on year, in contrast. And Turkish industrial production jumped 5.5%, its largest month-on-month advance in 13 months.
Malaysia’s current account surplus narrowed in 2022 to MYR 47.2 billion from MYR 58.7 billion in 2022.
Canadian building permits surged 11.3% in March.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German CPI, National Bank of Georgia, National Bank of Poland, U.S. CPI
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