3.4% Consumer Price Index (CPI) in April - easing on inflation suggests an interest rate cut sooner

In April, the Consumer Price Index (CPI) showed a slight easing of inflation, rising 3.4% annually but below expectations for a cut in interest rates. The CPI increased by 0.3% from March, with core inflation at 0.3% monthly and 3.6% annually. Markets reacted positively, expecting a Fed rate cut in September. However, retail sales remained flat, suggesting consumers struggled to keep up with price increases. Inflation drivers included shelter costs rising by 5.5% annually, energy by 2.6%, and transportation services by 11.2%. Despite higher prices, workers' real earnings fell by 0.2% monthly. Fed Chair Powell indicated a cautious approach, awaiting sustainable inflation declines before rate cuts, with markets anticipating a rate cut in September at the earliest. The Fed's previous rate hikes aimed to curb inflation but were insufficient due to sustained demand from fiscal and monetary policies.