Wednesday, May 19, 2010

One Eye on the Fed: April CPI

Year-on-year, overall CPI inflation eased to 2.2 percent (seasonally adjusted) from 2.4 percent in March. The core rate slipped in April to 1.0 percent from 1.2 percent the prior month.

At the core level, apparel prices fell 0.7 percent and the huge shelter component was unchanged. Providing some upward pressure were gains in recreation, airline fares, and medical care.

Consumer prices inflation remains extremely low-giving the Fed plenty of leeway in its timing of unwinding its balance sheet expansion. Bond traders should like today's news and equity markets should be happy that the Fed is not under pressure to tighten sooner rather than later.