Trump Wants Rate Cuts. The Data Just Made That Nearly Impossible.

"Headline CPI rose 3.8% year-over-year in April, up from 3.3% in March, the highest reading since 2023. Core CPI accelerated to 2.8% year-over-year, with the monthly reading doubling to 0.4% from 0.2%. The Fed's preferred gauge tells the same story: headline Personal Consumption Expenditures inflation hit 3.5% year-over-year in March, with core PCE at 3.2%, both well above the 2% target the Fed has now missed for five consecutive years."

"The proximate culprit is oil. West Texas Intermediate crude trades at $101.56 per barrel, near the upper end of its 12-month range and up from a December low of $55.44. The Strait of Hormuz remains effectively closed despite a two-week ceasefire. Energy accounted for over 40% of April's monthly CPI rise, with energy costs up roughly 4% in April after an 11% gain in March. Gasoline rose 21% in March alone, the largest monthly increase in BLS data going back to 1967."

"The Fed could write off energy as transitory if the rest of the basket cooperated, but the rest of the basket is heating up too. Grocery prices rose 0.5% and dining out rose 0.7% in April, the biggest monthly jumps since late 2025. Airfares climbed 2.8%. Shelter inflation accelerated to 0.6% from 0.3%. Services inflation has held in the 3.3% to 3.6% range for months, the stickiest piece of the pie and the one that responds least to rate policy."

"Meanwhile the employment side of the dual mandate offers no cover. Unemployment sits at 4.3%, unchanged for two months and within a remarkably tight 4.1% to 4.5% band over the past year. A labor market this stable provides zero urgency for emergency easing. The bond market has noticed: the 10-year Treasury yield has climbed from 3.97% in late Februa"

April CPI increased 3.8% year over year, rising from 3.3% in March, with core CPI accelerating to 2.8% year over year and monthly core inflation doubling to 0.4% from 0.2%. The Fed’s preferred PCE measures also ran hot, with headline PCE at 3.5% year over year and core PCE at 3.2% in March, both above the 2% target missed for five consecutive years. Energy pressures are central, with oil near the top of its 12-month range and energy contributing over 40% of the monthly CPI increase. Gasoline surged, while shelter and services inflation also firmed. Unemployment remains steady at 4.3%, offering little impetus for rapid easing.

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