April 2024 Inflation Commentary: Inflation Pressures Continue to Subside

April CPI inflation slowed to a monthly pace of 0.3% (0.4% in Feb-Mar) while the annual rate slowed to 3.4% (3.5% in March).

Inflationary pressures continue to subside or are at the least not igniting. The CPI-Shelter index rose at a monthly pace of 0.4% (Feb-April after a 0.6% increase in Jan).

-Rents of recent movers from Apartment List shows that rents continue to decline and that should continue to get reflected into the CPI even if slowly as other costs (tenant and household insurance kicked up 0.5% in March raising the y/y pace).

- Consumers are cutting on spending and are maxing out on reducing their saving (income not spent). The personal savings rate fell to 3.2% in March, just half the rate prior to the pandemic (7.9% in March 2019).

-Retail sales slowed to an annual nominal increase of 3%, but that means a decline in spending when adjusted for inflation.

With inflationary pressures continuing to weaken-- and if the #Fed sees this weakening as indicators of a sustainable downtrend-- even if inflation remains elevated at 3.4%, there could be a rate cut at the September meeting.

Financial markets are betting on a rate cut, with the 10-year T-note trending lower at 4.393% after the weaker inflation and retail sales data.