MNI BRIEF: US CPI Shows Encouraging Step-Down-Atl. Fed's Meyer

Underlying inflation in the U.S. is showing nascent signs of cooling to a 4% to 5% annual rate but "super core goods" prices are falling slower than expected, raising concerns that above-2% inflation could persist, Federal Reserve Bank of Atlanta economist Brent Meyer wrote in a note Wednesday after the April CPI report came largely in-line with investor expectations.

April is "another encouraging report," he said. "This is nascent, but it’s starting to look like underlying inflation has stepped down from extremely elevated to just really elevated."

Headline CPI rose 4.9% over the past 12 months, its lowest since April 2021, and was 4.5% annualized. Core CPI rose at an annualized rate of 5.0%, down modestly from the 12-month rate of 5.5%. Core services excluding rent-of-shelter prices rose at an annualized rate of 2.7% in April and is up 3.7% over the past three months annualized, off its year-over-year rate of 5.0%, he noted. Alternative measures of underlying inflation "were all fairly consistent" at between 4.0% and 4.8% in April, Meyer said, down from around 6.5% at the start of the year, a sign that "some of the steam is escaping."

However, core goods prices excluding the volatile used car category has only slowed to around 3.3% over the past six months from 8% in early 2022 and remains well above the usually flat rate seen before the pandemic. That's "one aspect of this report that may raise some concerns about achieving the 'last mile' toward price-stability," Meyer said.