INSTANT VIEW: April CPI tamer than expected
NEW YORK (Reuters) - U.S. consumer prices rose a smaller-than-expected 0.2 percent in April as energy prices held steady, a Labor Department report on Wednesday showed.
KEY POINTS: * The rise in April prices was less than the 0.3 percent gain Wall Street analysts polled by Reuters were expecting after a 0.3 percent advance in March. So-called core prices, which exclude volatile food and energy, were up just 0.1 percent, half the increase analysts had forecast. * During the month, energy prices were unchanged after a 1.9 percent rise in March, as gasoline prices dropped 2 percent. However, energy prices are up 15.9 percent from the same time a year ago. * Meanwhile, in a sign higher energy prices are in the pipeline for U.S. consumers, oil hit a record high this week likely pushing gasoline prices higher from record high levels. * Still, year-over-year consumer prices rose more modestly than forecast. Overall prices advanced 3.9 percent from April a year ago and core prices were up 2.3 percent. Analysts were expecting a 4.0 percent advance in overall prices and a 2.4 percent gain in core prices.
COMMENTS:
LOU BRIEN, MARKET STRATEGIST, DRW TRADING, CHICAGO:
"The important component Owners Equivalent Rent rose only 0.2 percent on the month and is rising by 2.6 percent on a year over year basis."
"One trend that continues is the lack of pricing power at the stores, a component called commodities ex-food and energy (goods on the shop shelves) was unchanged on the month and the year-over-year rate is up 0.1 percent."
JIM PAULSEN, CHIEF INVESTMENT OFFICER, WELLS CAPITAL
MANAGEMENT, MINNEAPOLIS:
"I think this takes the edge off. A higher number would have sent the 10-year yield over 4 percent and that would have pressured equities. I think equities will rally, at least at the open."
"People worried about the headline, it still seems to me the core is what's important and we still have a number of prices that are actually falling. Even if we have an inflation problem next year, we're talking about a core rate that goes from 2.4 percent to 3.5 percent, that will be enough to scare bond players and the Fed, but that's not a disaster."
ASHRAF LAIDI, CHIEF MARKET ANALYST, CMC MARKETS, NEW YORK:
"These numbers will spark some doubt as to whether Fed easing is truly over. They seem to leave the door open for further rate cuts. Fed speakers yesterday were spending a lot of time talking about inflation, but that recent chorus does not necessarily mean the Fed has abandoned its campaign
to reinvigorate the U.S. economy if needed.
"The CPI data should also be a positive for risk appetite and is likely to prolong the trend of yen weakness that we've been seeing."
DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S, NEW YORK:
"About what we expected. We're not seeing a lot of signs of enormous inflation in the domestic numbers."
DAVID WATT, SENIOR CURRENCY STRATEGIST, RBC CAPITAL
MARKETS, TORONTO:
"It takes a little bit of pressure off the Federal Reserve as some hope that inflation pressures are contained. It's bearish for the U.S. dollar. It allows the Fed to do what it feels it has to do to sustain growth later this year."
MARKET REACTION: * BONDS: U.S. Treasury debt prices pare losses, with the long bond turning positive on session. * CURRENCIES: U.S. dollar trims gains, turning flat on session. * STOCKS: U.S. equity index futures shoot higher. * RATE FUTURES: U.S. short-term interest rate futures rose, pricing in an 8 percent probability of a 25 basis point rate cut at the Fed's June meeting versus a 6 percent probability late Tuesday.
