US Dollar: Hot CPI keeps Fed cautious – Danske Bank

Danske Research Team highlights that United States (US) Consumer Price Index (CPI) data showed strong core and services inflation, reinforcing concerns about persistent underlying price pressures. Shelter and super-core components rose, while core goods remained flat. They note markets will watch upcoming PPI data to see if it confirms similar momentum and keeps the Federal Reserve (Fed) cautious.

Services and shelter drive CPI higher

"In the US, April PPI data is due for release. Yesterday's CPI print showed sticky monthly services and super-core inflation, reinforcing concerns around persistent underlying price pressures. Markets will watch whether PPI confirms similar price momentum."

"Headline inflation rose 0.6% m/m SA, in line with expectations, while core inflation was stronger than expected at 0.4% m/m SA (cons 0.3% m/m). Shelter rose 0.6% m/m and "super-core" (core services ex shelter) picked up to around 0.45% m/m, the highest in three months, underlining that domestic service price pressures remain uncomfortably firm. "

"By contrast, core goods inflation was flat at 0.0% m/m, suggesting limited pass-through so far from higher commodity prices and keeping underlying pressures largely concentrated in services, reinforcing a cautious Fed."

"In US monetary policy space, the Senate confirmed Kevin Warsh to a 14-year term as Federal Reserve governor by a 51-45 vote and is expected to vote as soon as today on a concurrent four-year term as Fed chair, positioning him to succeed Jerome Powell."

"Although Powell's term as chair formally ends on Friday, he stated last month that he will remain on the Fed board as a governor."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)