PREVIEW: US CPI due Tuesday 12th May at 13:30BST/08:30EDT

CPI is expected to rise by 0.6% M/M in April (prev. 0.9%), while the core rate is seen rising 0.3% M/M (prev. 0.2%). Headline Y/Y is expected at 3.7% (prev. 3.3%) with core at 2.7% (prev. 2.6%). 

The Cleveland Fed’s inflation nowcast gauge is tracking April CPI at 0.45% M/M, versus 0.42% M/M in March, and the core rate at 0.21%, unchanged from March. Annual rates are tracking at 3.56% Y/Y in April and the core rate at 2.56% Y/Y (the BLS reported annual core inflation of 2.6% in March, for reference). 

The data follows a hot March CPI report, which showed a pickup in consumer prices, with the annual rate rising to its highest since May 2024 at 3.3% Y/Y. The rise was driven by energy prices, which increased 10.9% M/M in March, led by a 21.2% jump in gasoline. 

Traders will continue to focus on whether the war-driven energy shock is feeding into inflation and consumer demand. Fed officials are now firmly focused on inflation amid a stable labour market. 

At the April FOMC meeting, three dissenters (Hammack, Kashkari, and Logan) voted against including any easing bias in the statement, arguing that inflation risks had risen enough for the Fed to keep all options open, including holding rates for longer or even hiking, rather than signalling an easing bias. Some analysts suggested this might be a message to incoming Chair Kevin Warsh, who has previously endorsed lower rates and tighter balance sheet policy. Another key shift in the April statement was on inflation, with the line that inflation “remains somewhat elevated” replaced with “elevated”, and the Fed attributing this to the recent surge in global energy prices, a tweak judged to be a hawkish tilt. 

Elsewhere, the April data will include one-off rent and OER CPI index adjustments after last Autumn’s government shutdown shortfall; Barclays says this would likely give core inflation a one-off boost of around 10bps.

JPM CPI Scenarios (Core M/M focus, 1-day SPX move):

JPM assigns a probability of certain Core M/M outcomes and its expected 1-day price reaction in the SPX. It also highlights that options expiring May 12th are pricing an implied move of around 0.8%, based on May 8th prices.

• 5.0% chance: Above 0.45%; SPX seen losing 1.25% to 2.0%
• 25.0%: Between 0.40% and 0.45%; SPX seen losing 0.25% to 1.0%
• 40.0%: Between 0.35% and 0.40%; SPX seen between gains of 0.50% and losses of 0.50%
• 25.0%: Between 0.30% and 0.35%; SPX seen gaining 0.75% to 1.25%
• 5.0%: Below 0.30%; SPX seen gaining 1.0% to 1.5%