US Consumer Inflation Resumes Downward Trend as Domestic Demand Cools

• U. S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut. The hope that the Federal Reserve would start its easing cycle this year was further bolstered by other data on Wednesday, which showed that retail sales were unexpectedly flat last month.
• The reports suggested that domestic demand was cooling, which will be welcomed by officials at the U.S. central bank as they try to engineer a "soft-landing" for the economy.
• The consumer price index rose 0.3% last month after advancing 0.4% in March and February, the Labor Department's Bureau of Labor Statistics said. The higher cost of living has detracted from the economy's resilience and is a campaign theme for the Nov. 5 presidential election.
• President Joe Biden said prices were still too high but argued that his agenda, which includes building two million homes and taking on Big Pharma to lower prescription drug prices, "will give families breathing room." Donald Trump's campaign blamed inflation on the Biden administration's policies and touted the former president's America First agenda of low taxes, lower prices, and higher wages.
• Inflation accelerated in the first quarter amid strong domestic demand after moderating for much of last year. Last month's slowdown was a relief after data on Tuesday showed a jump in producer prices in April. Inflation is being driven by providers of services like motor vehicle insurance, housing, and healthcare catching up to higher costs.
• Economists expect price pressures to ebb this quarter and inflation to gradually move toward the Fed's 2% target as the labor market is cooling. On Tuesday, Fed Chair Jerome Powell said, "I expect that inflation will move back down ... on a monthly basis to levels that were more like the lower readings that we were having last year."
• Financial markets saw a roughly 73% probability of a rate cut in September, up from 69% before the data. A few economists anticipate the Fed will start lowering borrowing costs in July.

(Source: Reuters)