April's Consumer Price Index report released on Tuesday was generally received as positive news by markets and analysts. The data indicate that inflation is cooling faster than expected, supporting hopes for a potential pause or even an eventual cut in interest rates by the Federal Reserve.
CPI Data: The Consumer Price Index was 2.3% higher compared to a year ago, coming in below economists’ expectations of 2.4%.
The core CPI, which strips out volatile food and energy categories, rose to 2.8% on an annual basis, and month-over-month, it increased 0.2%, below expectations of a 0.3% increase.
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Expert Ideas: Economists and analysts were pleased overall with April's CPI data, but there is some disagreement as to the effect of tariffs and a possible increase in inflation later this year.
Mohamed El-Erian, chief economic adviser at Allianz, highlighted the ongoing discussion about whether tariffs will drive inflation and said April's data will bring little clarity to the debate.
"While good news, the numbers will have little impact on the ongoing debate on the possible inflationary impact of tariffs -- between those who will interpret these numbers as illustrating no price pass-throughs to speak of, and others who will argue it's too early to see them," El-Erian wrote on social media.
Bill Adams, chief economist for Comerica Bank, does anticipate inflation picking up in the second half of 2025 as businesses pass the cost of tariffs onto consumers.
However, he tempered this view: "After cuts to the tariff rates applied to most imports, the effect will be smaller than it appeared a few weeks ago," Adams said.
Chris Zaccarelli, chief investment officer for Northlight Asset Management, said that April's cool CPI data and the breakthrough in the trade war with China should provide much-needed relief for markets and investors.
"And just like that, the markets' twin fears -- a tariff-induced recession and sticky inflation -- have been greatly assuaged," Zaccarelli said.
Markets React: U.S. stock indexes were mixed in Monday's midday trading with the S&P 500, tracked by the SPDR S&P 500 ETF (NYSE:SPY), up 0.79% and the Dow Jones Index, tracked by the SPDR Dow Jones Industrial Average ETF (NYSE:DIA), down 0.39%.
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