US CPI: It’s too early to declare victory over inflation!

Deniza Cristian 11/05/2023 | 18:13

The headline was slightly below expectations at 4.9% year-over-year. This is the first time it is below 5% in two years. But this is too early to declare victory over inflation. Indeed, the core CPI – which better shows underlying inflationary pressures – was at 0.41% month-over-month and 5.5% year-over-year. This is still too hot.


However, this is unlikely to force the U.S. Federal Reserve to hike in June. Expect the monetary pause to last, even beyond the timeframe forecasted by the market. Obviously, today’s figures do not in any way corroborate the possibility of rate cuts this year.

”A cold CPI would have meant that the U.S. economy is certainly already in recession. A hot one would have meant that the U.S. economy will soon be in recession. Finally, none of this has happened. The April CPI was broadly in line with the consensus”, explains Alin Latu, Country Manager iBanFirst România.

On a yearly basis, the main drivers of inflation are:

  • transportation (+11%);
  • food away from home (+8.6%);
  • electricity (+8.4%).

In the short-term, pay attention to used car prices. It was a major driver of inflation in 2022. It is now surging again. This may be the cause of worries in the coming months.

FX-wise, this report is not a game-changer. With the Fed in a pause mode while other central banks – including the European Central Bank – continue tightening, we think the USD will weaken further this year as the U.S. interest rate and growth premium erodes. The current weakness will also be exacerbated by ongoing speculative bearish positions against the USD – see the below chart.

BR Magazine | Latest Issue

Download PDF or read online: May (I) 2023 Issue | Business Review Magazine

The May (I) 2023 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “MedLife BVB performance highlights potential of Romania’s emerging
Deniza Cristian | 17/05/2023 | 15:38

    You will receive a download link for the latest issue of Business Review Magazine in PDF format, based on the completion of the form below.

    I agree with the Privacy policy of

    I agree with the storage and handling of my data by

    Advertisement Advertisement
    Close ×

    We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

    Accept & continue