The US Consumer Price Index is expected to increase by 3.4% year over year in April, as opposed to a 3.5% annual increase in March. Meanwhile, global market experts are of the view that the Fed might start lowering interest rates in September. S&P 500, the barometer of US stocks is up almost 10% YTD after the IT industry titans’ explosive reports and a robust earnings season propelled the U.S. stock market’s recovery from 2024’s first genuine downturn.

In reality, the US Federal Reserve’s attempts to manage inflation have not been entirely successful. The United States’ inflation rate is persistent and is taking its own sweet time to drop to the US Fed’s target of 2%.

Before we look at April’s US CPI numbers, this is how inflation data emerged in March. An important indicator of inflation, the consumer price index (CPI), increased by 3.5% YoY in March (0.4 percent monthly), above forecasts and indicating an acceleration of inflation. The core inflation index for all items less food and energy increased by 3.8 percent over the last 12 months (0.4% monthly) in March.

Has US inflation fallen last month remains to be seen when the Bureau of Labor Statistics releases April 2024 data, April 15, 2024, at 8:30 a.m. Eastern Time.

However, unexpectedly high inflation might postpone the rate cut or perhaps force the Fed to hike interest rates beyond their current 23-year peak. The Fed plans to not cut rates until inflation is steadily approaching the target, leaving the billion-dollar question unanswered about when it will deliver the first cut.

Now, a lot of the world is waiting to see if the U.S. inflation report for April indicates a reduction following three months of positive surprises. According to median projections, core consumer prices would increase by 0.3% in April as opposed to 0.4% in March, bringing the annual rate down to 3.6%.

For the sixth time in a row, the US Federal Reserve’s Federal Open Market Committee (FOMC) meeting held from April 30 to May 1 decided to maintain rates at 5.25%- 5.5% range.

Timings of US Fed’s First Rate Cut

How the US Fed reacts will depend largely on how the economy is responding to the higher-for-longer rate regime. Concerns about whether interest rates are having enough of an effect on the economy to lower prices were voiced by Fed officials. While Kashkari, the head of the Minneapolis Fed, contended that rates are not having enough of an impact on housing, Chicago Fed President Goolsbee stated that the real interest rate is high.

Recent US non-farm payroll data that was lower than anticipated suggested that the labor market is cooling, which could lead to interest rate reductions. Market expectations were dampened by Fed officials’ cautious tone and expression of worry over inflationary pressures.

In April, wholesale prices at used automobile auctions dropped 2.3%, marking a 14% year-over-year fall, which gave economists cause for optimism. The cost of used cars accounts for a sizable amount of inflation overall.

With elections round the corner and inflation remaining sticky, will deteriorating economic conditions force the US Fed to cut rates before America goes to vote in November?