Consumer prices rebound 0.2% in April on jump in petrol

US wholesale prices up slightly, food costs down

The Labor Department said its Consumer Price Index rose 0.2 percent in April as increases in the cost of gasoline and rents were tempered by a drop in motor vehicle prices.

April's small increase in the producer-price index was driven by rising prices for transportation and warehousing services that were partly offset by falling food prices. This was a decline from the 0.2 percent core CPI rose in March and February. Those numbers indicate moderate inflation, but the 12-month increase of 2.5% indicates steadily climbing inflation. June gold futures last traded at $1,321.30 an ounce, up 0.62% on the day.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 per cent last month after a similar gain in March.

An inflation gauge that the Fed tends to monitor most closely rose 1.9 percent in March from a year earlier, almost matching the Fed's annual inflation target of 2 percent.

The energy index increased 1.4% in April after a 2.8% decline in March.

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However, excluding the volatile food and energy components, "core" CPI rose just 0.1 per cent and was 2.1 per cent higher than the same month of a year ago.

US consumer prices increased modestly in April, pointing to a steady buildup of inflation that will likely keep the Federal Reserve on a path of gradual monetary policy tightening.

For consumers, gasoline was one of the most expensive items in April. Investors in inflation-adjusted investments are also interested in non-seasonally adjusted inflation, which is used to adjust the principal balances of TIPS and set future interest rates for I Bonds. The increase was weaker than expected as consensus forecasts were calling for a 0.3% rise.

That means holders of Treasury Inflation-Protected Securities will see their principal balances climb 0.4% in June. Unprocessed goods costs rose 3.2% from a year earlier last month.

What this means for future interest rates.

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The modest pace of consumer inflation may send a reassuring signal to the Federal Reserve, which is considering how quickly to raise interest rates this year.

Petrol prices rebounded 3% in April after tumbling 4.9% in March. The S&P 500 gained 23.12 points, or 0.86 percent, to 2,720.91 and the Nasdaq Composite added 56.36 points, or 0.77 percent, to 7,396.27.

I wrote this article myself, and it expresses my own opinions.

At this point, the Federal Reserve can be expected to raise short-term interest rates at least twice more in 2018.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I am not receiving compensation for it (other than from Seeking Alpha).

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