CPI Report Revealed Inflation is Easing, but Certain Sectors Remain Elevated

Persistent Rise in Essential Necessities: Impact on CPI and Fed’s Interest Rate Outlook

The report revealed that the CPI rose 0.4% in April, matching estimates from economists polled by the Wall Street Journal. The monthly increase in April was four times the uptick of 0.1% in March.

Many essential daily necessities continue to be persistently elevated. Shelter, for example, was the largest contributor to the monthly all-items increase, this was followed by increases in used cars and trucks and gasoline. The Report underscored that consumer inflation was up 4.9% in April year over year. April’s Inflation had a fractional decrease moving from 5% year-over-year in March.

Jameel Ahmad, in a note told his clients that, “Weakness in the dollar was likely due to the admittance that while this data might not tell us enough about what the Fed is thinking, it at least provides some indication that the Fed will not be pushed to raise interest rates even higher in a hurry.”

The report will give the Federal Reserve the flexibility which will allow them to continue to study the data and wait for clarity which will be forthcoming from future reports in the coming months.

Gold’s Reaction

Initially gold moved strongly to the upside immediately after the CPI was released at 8:30 AM EDT. Gold futures basis the most active June contract opened at $2036.80 at 8:30 AM in New York when the report was released. By 9:30 AM EDT gold futures traded to a high of $2056 and settled at $2052.70. However, over the next three hours, gold prices declined consistently settling at $2045 at 10:30 AM EDT, $2036 by 11:30 AM EDT and closing at $2031 by 12:30 PM in New York. As of 6:25 PM EDT gold futures are currently fixed at $2037.50.

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Wishing you as always good trading,

Gary S. Wagner