U.S. Inflation: Has It Peaked?
XM Group | May 10, 2022 11:51AM ET
CPI may have topped at 8.5%
Even though inflation hit a 41-year high in March, American consumers have kept spending and the labour market has continued to tighten. The recent batch of upbeat data is helping to dispel fears of an imminent recession, further bolstering the dollar amid the heightened risk of a downturn in other countries. But this unprecedented period of swelling inflation may be coming to an end.
The 12-month rate of CPI is expected to have eased to 8.1% in April from 8.5% previously. More significantly, the month-on-month rate is projected to drop sharply 1.2% to 0.2%, which would mark the slowest pace of increase since November 2020. The core figure, which excludes food and energy prices, is also forecast to moderate, falling from 6.5% to 6.0% year-on-year, although the monthly rate is predicted to pick up to 0.4% from 0.3%.
However, if the CPI data fails to cool rate hike bets and dollar/yen smashes above the 131 level, the 261.8% Fibonacci of 133.40 could become the next major target for dollar bulls.
There can be no doubt that peak inflation will be a significant moment for the markets, but Wednesday’s numbers may not be conclusive enough to confirm we’re there yet. The next few months will be critical as investors might hit the panic button if the economy begins to slow down before price pressures have substantially eased. But in the meantime, traders will likely welcome any encouraging trace of peak inflation.
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