1. Data Overview and Market Expectations
Overall CPI: The market predicts that the April CPI will increase by 0.3% month-on-month, with a year-on-year growth rate of 2.4%, further declining from 3.5% in March. Actual data shows that the April CPI increased by 3.4% year-on-year, and the core CPI rose by 3.6%, both in line with expectations. This result indicates that inflationary pressures continue to ease but remain above the Federal Reserve's target of 2%.
Core CPI: The year-on-year growth rate of the core CPI, excluding food and energy, has dropped to 3.6%, the lowest level since May 2021, indicating a structural cooling trend in inflation. On a month-on-month basis, the core CPI rose by 0.3%, slightly lower than the previous value of 0.4%, in line with market expectations.
2. Sub-item Data and Driving Factors
Housing Costs: Housing prices rose by 5.5% year-on-year and 0.4% month-on-month, remaining a major factor driving inflation. Although private market indices show a slowdown in housing price growth, the lagging effects of rents and owner-equivalent rents continue to affect the CPI.
Energy Prices: The energy index rose by 2.6% year-on-year and 1.1% month-on-month, with gasoline prices increasing by 2.8%, partially offsetting the overall downward pressure on energy prices. The impact of international oil price fluctuations and tariff policies on energy costs still requires ongoing attention.
Commodity and Service Differentiation: New car prices decreased by 0.4% year-on-year, and used car prices fell by 6.9% year-on-year, indicating improvements in supply and demand in the automotive market. However, prices for services such as air tickets and travel significantly rose month-on-month due to the boost from the 'May Day' holiday, reflecting resilient consumer demand.
Initial Impact of Tariffs: Tariffs imposed on Chinese goods have begun to affect certain import-intensive categories, such as toys and footwear, with further impacts expected in the coming months. However, companies have temporarily buffered the price shock through stockpiling and supply chain adjustments.
3. Market Reactions and Policy Expectations
Financial Market Fluctuations: After the data release, the U.S. dollar index fell briefly, while U.S. stock futures rose, indicating a positive market reaction to the easing of inflation. The yield on the 10-year U.S. Treasury bond retreated, reflecting an increase in expectations for interest rate cuts.
Federal Reserve Policy Path: Despite easing inflation, the Federal Reserve still faces the risk of 'stagflation'. Tariffs may push future inflation higher, while resilience in the labor market (with 177,000 new non-farm jobs added in April) limits the space for interest rate cuts. The market expects that the Federal Reserve may delay interest rate cuts until the second half of the year, and the total number of cuts for the year may narrow to three.
Long-term Inflation Pressure: If tariff policies continue, the core CPI could peak at 4.4% in 2026. However, falling housing costs, stabilizing energy prices, and differentiated consumer demand may partially offset the impact of tariffs.
4. Future Focus Areas
Progress on Tariff Policies: Substantial breakthroughs in U.S.-China tariff negotiations have alleviated price pressures on imported goods.
Housing Inflation Turning Point: The private rental index has shown a slowdown in growth. If this trend is reflected in official data, it will exert a continuous downward pressure on the core CPI.
Employment and Wage Dynamics: The wage growth rate in April slowed to 0.2%. If the labor market continues to cool, it may weaken consumer capacity and suppress inflation.