What Are the Latest Inflation Numbers — and Will Inflation Ever Go Down Again?

Key takeaways

• Inflation is currently at 4.9% in the U.S., a two-year low but still over double the Fed’s target
• The resilient jobs market is the apple upsetting the cart at the moment
• Traders are pretty sure the Fed will pause on raising interest rates this month, but it’s not a guarantee

Inflation: it feels like we’ve been talking about it forever, but it’s for good reason. Inflation is what makes everything more expensive, so it’s imperative that the Federal Reserve stops it from spiraling. It’s done a decent job so far, but there’s still a long way to go before the job is done. Here’s the lowdown.

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What are the latest inflation figures?

US inflation is based on the monthly consumer price index (CPI) figures, with the latest April figure coming in at 4.9%. It’s kind of a win — it’s the lowest inflation number in two years — but the result is still way ahead of the Fed’s 2% target.

Bringing down inflation is a delicate balancing act for the Fed: raising rates too high could trigger a recession, while not doing enough could bake in the inflation rate and cause stagflation. We don’t envy them.

That’s why the Fed relies on critical data sets like price indexes and job reports to see if its monetary tightening policy is working. Unfortunately, the jobs market is proving to be surprisingly resilient, with 339,000 new jobs added to the economy last month — far surpassing the 190,000 predicted figure. That suggests the Fed still has some way to go in battling inflation.

What could happen at the Fed’s meeting?

All eyes are now on the Fed to see what could happen with interest rates. This week, a surprise rate rise from the Canadian central bank sent jitters across the US markets yesterday, but that only briefly dampened Wall Street’s spirits as the S&P 500 broke through the 4200 barrier.

The CME FedWatch tool currently puts the chances of the Fed holding steady with interest rates in June at 71%. The Fed won’t want to spook markets with any surprises, but it also needs to factor in the data it’s getting on the economy’s health, so a pause isn’t a dead cert.

There’s also talk of the Fed skipping this month and raising interest rates again in July. We’ll need more data to see if that becomes a reality, but if the jobs market continues to remain strong, we could see interest rates increase further. Fed funds futures are currently at a 50% odds for another quarter-point hike.

The bottom line

Inflation is a tricky — and, in this case, sticky — problem for central banks to grapple with. Compared to other countries, the US has done a pretty good job — but plenty of wiggle room still exists for that to turn sour. The data is critical to determining how the Fed acts, so next week’s CPI result will be crucial.

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