Inflation cools, CPI at 4.9% – will Fed stall the interest rate hikes in Q3?

CPI, Inflation cools, CPI at 4.9% – will Fed stall the interest rate hikes in Q3?

Key Takeaways:

  • CPI data comes back with a 0.1% decline month-over-month.
  • Will Fed adopt a more dovish approach?
  • Experts don’t see Powell pivoting in 2023.

YEREVAN ( – The US inflation has shrunk to 4.9% in April, standing 0.1% below March numbers, according to the latest Consumer Price index (CPI) report from the Bureau of Labor Statistics.

The data came after the Federal Reserve persisted with its hawkish approach and hiked up interest rates by another 25 bps in the 10th consecutive revision. Here’s a short rerun of the report and its possible implications for the Fed’s upcoming policy.

Transportation costs lead US Inflation against the cooling fuel prices.

The report specified that the index for transportation was “by far the largest contributor” to the monthly all-items increase, standing at 11% year-over-year. While the food index was virtually unchanged since March, gasoline and fuel oil indexes contributed to the cool-off, with the latter at -20%.

The energy index rose 0.6% in April after decreasing 3.5% in March. The gasoline index increased 3% in April, following a 4.6% decrease in the previous month. (Before seasonal adjustment, gasoline prices rose 5.2% in April)

specified the report.
CPI April report. Source:
CPI April report for April 2023. Source:

The data showed that while inflation is still well above the Fed-set healthy 2% target, it is at least showing continuing signs of decelerating. However, will the 0.1% decline be enough for Fed Chair Powell to pivot or at least stall the interest rate hikes?

US inflation cools to 4.9%. sOurce:
US inflation cools to 4.9%. Source:

Experts don’t see a pivot ahead.

Quincy Krosby, chief global strategist at LPL Financial, commented on the data, calling it a “net positive” for the markets. “Today’s reports suggest that the Fed’s campaign to quell inflation is working, albeit more slowly than they would like,” assessed the expert. The market’s slow reaction means that it is too soon to talk about a possible pivot from the Fed’s hawkish policies.

Przemyslaw Kral, CEO of ZondaCrypto, told CoinChapter that Fed’s insistence on sticking to the quantitative tightening policies would mean Powell needs to “carefully consider how much more the economy can handle.”

A pivot away from rate hikes could result in increased investor confidence and a potential stock market recovery, but several factors are at play. If the EU and other major central banks continue on a path of tightening monetary policy, the dollar could suffer as a result.

said the CEO.

Nikolay Denisenko, Co-founder and CTO of Swiss neo-digital bank Brighty app agreed with the outlook. “Persistent price increases for items like used cars, apparel, and rent might create challenges for the industry due to the potential financial strain on consumers,” said the expert.

Stakeholders in the fintech and blockchain industries should stay on their toes and keep a close eye on economic developments, central bank policies, and interest rate decisions to gauge the potential impact on their businesses and investments.

concluded Denisenko.

Conversely, Michelle Cluver, a Portfolio Strategist at ETF firm Global X, told CoinChapter that a halt in interest rate hikes appears likely.

The end of the Fed’s rate-raising cycle looks likely. Until now, there has been a high level of consensus within the FOMC about how high-interest rates need to rise; however, as we approach the end of the rate hiking trajectory, an agreement is likely to be more challenging.

asserted the expert.

Also read: No Solution in Sight for US Debt Ceiling Crisis After Joe Biden and Kevin McCarthy Meet.

CPI, Inflation cools, CPI at 4.9% – will Fed stall the interest rate hikes in Q3?

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