U.S. headline consumer price inflation likely accelerated sequentially in April

The U.S. headline consumer price inflation is likely to have decelerated in April in year-on-year terms. According to a TD Economics report, the headline CPI is expected to have slipped to 2.2 percent year-on-year, with prices rising 0.2 percent sequentially. Energy prices are expected to have slowed further from their highs in February as gasoline prices were fairly muted on the month. Food prices are expected to have strengthened further, particularly accounting for adverse weather and labor shortages cited by farmers.

“On a somewhat downbeat note, we expect a modest 0.1% print on the core index, leaving the core inflation rate unchanged at 2.0% y/y but with downside risk”, added TD Economics.

This might indicate a further, though more modest drag from wireless services prices along with continued deflation in vehicle prices. But keeping these pockets of weakness aside, a strengthening trend continues in place on stable strength in the remaining price categories of services and a slow rebound in goods prices.

Furthermore, labor market fundamentals bolster this view with slack essentially diminished. Such a backdrop of tighter labor market conditions would be the driving force behind the timing of the next Fed rate hike that is still expected to take place in June, noted TD Economics.