On a yearly basis, as of last month, the US CPI index rose by 8.3%, below the March CPI rate of 8.5%, and above the market expectation of 8.1%.
After today’s inflation data, the Federal Reserve policymakers might give additional consideration to more aggressive hikes. The April inflation data confirms that inflation hasn’t peaked yet, even if there are signs of slowing down, but till now the market remains hot.
Just one week later, the FED chairman states that a 75 basis point interest rate hike is no longer on the table. Today’s CPI reports came as a warning to the Federal Reserve and the US economy as well.
The labor department reported this morning that April’s consumer index rose by 0.3%, to settle at 8.3% year over year. Last month’s CPI rate hit 8.5%, making last month’s inflation data slightly lower than the previous month’s.
However, experts’ forecasts predict that this month we will see an 8.1% inflation rate, which adds additional complexities to the FED’s interest rate decisions.
Stocks turned lower after releasing last month’s CPI reports. It’s like the market can’t bear any negative news anymore.
Fuel prices in the United States rose significantly today, with crude oil rising 5% to $105.22 per barrel.
The S&P 500 fell 1.65% to 3,935.18 basis points at 3:50 p.m. on Wednesday. The tech-heavy Nasdaq fell by 3.18%, classifying tech stocks as high or non-desirable at the moment. Other rising concerns, such as high prices, supply chain shortages, and Chinese lockdown, are causing investors to sell their tech stocks.
The Dow Jones average industrial index declined by 1% and retreated to 31,834.11 basis points. All things considered, the U.S equity market lost about $9 trillion this year, which makes it hard for the Wall Street indexes to bounce back and erase their losses.
In terms of the market reaction to today’s CPI reports, first, the USD was lower and declined due to rising concerns about interest hikes. The US dollar remains the world’s largest currency, but inflation hasn’t peaked yet, which threatens its market value and could decrease it. Yet, as of 4:02 PM in New York, the Euro/US dollar fell by 0.14% to 1.053. As for BTC, the largest cryptocurrency remains in a falling trend after declining by 6.02% as of Wednesday at 4:00 PM.
Furthermore, the Federal Reserve might consider tightening its monetary policy.
Secondly, even with these hot data, it is unlikely to see a 75bp interest hike by the next meeting. The Federal Reserve President Jerome says at its latest meeting that a 75Bp interest hike so out of consideration at the moment.
The economists are divided in opinions, some believe that the consumer index is slowing down, while others think that inflation hasn’t peaked yet. Till today, the inflation rate hasn’t reached its all-time high. With a 50bp points interest hike the inflation might slow down, but some suggest that we need to put aggressive considerations to cool down inflation.
In light o these week’s events, it’s unlikely to see a fast market recovery given the thought that prices will not cool down any time soon.
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