Tuesday’s Consumer Price Index report delivered mixed but ultimately encouraging news for American families, with core inflation undershooting expectations for the fifth straight month even as headline numbers matched forecasts.
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The headline CPI did tick up as expected, with consumer prices rising 0.3 percent monthly and 2.7 percent annually, but the core numbers tell the more important story for Fed officials weighing their next move.
Did Tariffs Have an Impact?
Some of the early headlines regarding the inflation report point to recent tariffs as the reason for what the Associated Press called the “highest level since February.”
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However, the market seems to be taking recent news of tariffs in stride, believing now that tariff announcements are preludes to negotiation and that they aren’t permanent. Wall Street appeared largely unaffected coming out of the weekend in the wake of announced tariffs on European Union nations and Mexico.
CNBC’s Rick Santelli points out that, given what we’re seeing in the American economy right now, today’s report contains “respectable” numbers.
All Eyes on the Fed
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While we’re still not at the Fed’s two percent inflation target, today’s report shows the underlying trend moving in the right direction. The core miss gives policymakers the evidence they need that inflation pressures are genuinely easing, not just temporarily masked by energy price swings.