5 Economists On April Inflation Data: CPI Number Has Experts Joining Fed Pause Bandwagon

The latest inflation report for April released Wednesday revealed the 10th consecutive decline in the annual CPI rate, which fell from 5% to 4.9%, falling short of expectations for a 5% reading. Inflation excluding food and energy eased from 5.6% to 5.5%, matching estimates. 

After a negative reaction following the CPI print, the U.S. Dollar index (DXY), which is closely tracked by the Invesco DB USD Index Bullish Fund ETF UUP, recovered some ground in morning trading on Wall Street, while the SPDR S&P 500 ETF Trust SPY erased all gains post-announcement. 

Here's what economists and experts are saying Wednesday about how the April inflation numbers could drive the Fed's upcoming interest rate decisions. 

• Bank of America's U.S. chief economist, Michael Gapen, said the details of the CPI report are "encouraging" and support a disinflationary trend. This inflation report "should keep the Fed comfortable with a hold in June," Gapen said. One more jobs report and one more inflation print before the June meeting represent the key risks to the view, according to BofA. 
• Charlie Ripley, senior strategist for Allianz Investment Management, highlighted further "progress towards bringing down elevated inflation levels" and stated that core services ex-housing inflation is moving in the right direction. According to the expert, an in-line reading of CPI should give a runway for the Fed's conditional pause in rate hikes, as further progress toward lowering inflation is clear.
• Joseph Brusuelas, chief economist at RSM US LLP, holds quite a contrarian view, and he remains in the rate-hike camp at the next FOMC meeting, given the elevated rate of inflation and the fact that a core reading of 5.5% is unacceptable. "Supercore inflation," or services inflation excluding housing, which is the Fed’s key policy metric inside the CPI, increased 0.2% on the month and is 5.1% higher on a three-month annualized change, the economist noted. 
• In a Bloomberg interview, Vincent Reinhart, chief economist at Dreyfus & Mellon, also expressed a cautious view, saying that slowing inflation data may be a "head fake" and is not enough for the Fed to stop rate hikes.
• "You better be sure when you stop, you’re not going to look back and regret it just a couple months later,” Reinhart said.
• Chris Zaccarelli, CIO of Independent Advisor Alliance, said we are in a holding pattern. The Fed will leave the option open to raise rates again in the future, he said: albeit historically, once the Fed pauses, it is not likely to resume rate hikes.

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