CPI: What to expect from key inflation data

The latest Consumer Price Index (CPI) data will be released on Wednesday. Core CPI is expected to increase 3.6% year over year. Car insurance, rent, and healthcare are the categories within the index that are expected to lead the easing of price pressures for this latest reading.

Yahoo Finance anchors Seana Smith and Myles Udland explain what to expect from this latest reading, how it will impact the Fed and consumers, and more.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video Transcript

Crucial inflation data on deck.

The latest CP I print out Wednesday, Wall Street largely expecting those sticky high prices to show some signs of easing core CPIS set to rise 3.6% year over year in April.

That'd be down from March's 3.8% increase.

A 3.6% reading would be the slowest annual gain on the core CP I number in three years uh on the core measure, car insurance, rent, health care set to help ease these pricing pressures.

Um char we still have inflation that's gonna be, you know, roughly two times what the fed's target is set to be.

So you're looking for 2% 3.6% is, I don't know, we're gonna consider it a victory of sorts.

If indeed we get that number.

Um The components that we called out there, particularly the car insurance is an interesting one because we've seen the last two inflation trends.

Car insurance come in almost 50 year highs.

Uh We know there's some structural problems in the insurance market.

Uh as some people say, more and more people are talking about this.

Um I'm not sure exactly if Jay Powell wants to go out there in, uh, I mean, they're not gonna cut rates in June, but I'm not sure who wants to go out there in July or September and say, well, you know, we're, we're seeing these insurance markets right size.

So we're gonna go ahead and cut rates, but it is a growing subtext within the conversation of what would prompt the fed to cut rates, particularly as we continue to see.

I mean, dow is up eight days in a row.

The market's pretty comfortable with the level of rates.

They've made their piece.

I've said this 1000 times.

They've made their peace with, you know, five, you know, five and three eights, you know, fed funds rate for better or for worse.

Yes, they certainly have.

And we, we spoke to Mark Zandi about this over at Moody's on Friday and he was talking about the fact that, hey, that 2% level should actually be increased, not something really revolutionary.

Obviously, that talking point has been brought up time and time again.

But I think the case though for that argument to be made is getting a bit stronger when you do see the economy remain resilient when we are seeing some softening within the labor market.

But overall, the labor market obviously holding up much better than almost any forecaster had anticipated up until this point.

So I think if we do see some improvement, even just marginal improvement, I think it's going to be enough here in order for you can then make the argument that the rate cuts are still on the table.

We might even get two before the end of the year.

And then you have some out there saying that, hey, if we do start to see improvement and, and consistent improvement, maybe three could even be on the table.

And I know we'll talk about this later in the, in the hour and we'll probably talk about this all week, maybe for the next couple of months.

But the, the, the whip saw that we've seen because, you know, now we're, we're going back to this, we have 23 rate cuts, you know, maybe we're back on the table.

I mean, it was a week and a half ago that it was like, Powell was literally asked about stagflation, you know, not that long ago.

What was the May 1st was the Fed meeting?

Um And so the speed with which we've moved off of that narrative and back as you're outlining to what really predominated at the beginning of 2024.

I think that the challenge, maybe it's a good problem for the Fed, although some would say there's no good problems but things got, so let's say out of hand, relative to what they were hoping the market would be expecting, they were hoping the market would essentially just follow the dots and remain conservative.

Traders got so aggressive pricing out any rate cuts that as the market comes back to the FED, which is not a situation they have been in in recent years, maybe the communications ultimately get a little bit easier.

And, you know, we're gonna talk about the tariffs later on and, you know, Ben has done a lot of great work talking about Powell's political predicament, but perhaps the market narrative coming back to the FED can take some of these political conversations away from them, which is, you know, would be another desired outcome.

Though, of course, a po politics is not factor in um they have a creative way of doing that, but you know, official line.

But I do think that also just highlights how much uncertainty there is out there, right?

Just in terms of the whips, all the fact that the market is quick to jump on almost any sort of tidbit of new information.

Exactly what that could mean in terms of the leadership, the rotation, whether or not we could see more broader uh pressure across the board.

So any of state on that remains to be seen.

But we're gonna get the two readings on inflation this week.

You've got PP I and then obviously CP I will get P CE again uh in a week or two when you, when you take all of that into account, clearly, it's coming ahead of that next meeting here for the Fed.

We'll see whether or not how much that language is going to change.

I don't know though.

Probably not.

I, I think that they made their, they made their subtle, well, they made the subtle tweak in May.

Um, and then, you know, this meeting that we're gonna have, uh, shoot, it's only four weeks from Wednesday, I think.

Um, you, you get the full, the gamut, you're gonna get the dot Plot, you get the SEP, you get the whole kit and caboodle with the fed.

And so it makes, I don't wanna say it makes it easier, but the statement language becomes, but one part of the overall communications where you have the dot Plot, you have the economic forecast, you have the inflation outlook, have unemployment, which I think is probably gonna be a growing part of this conversation, which is just how much softening in the labor market does Powell?

Not only want to see, but will they accept?

And we'll get a sense of that in the SEP.