The US Bureau of Labor Statistics is set to release the April Consumer Price Index (CPI) data on Tuesday, with expectations pointing to another significant increase in consumer inflation following March’s sharp rise [1]. The monthly CPI is forecast to climb by 0.6%, after a 0.9% jump in March, while the annual CPI is projected to reach 3.7%, up from 3.3% in March and marking the highest level since September 2023 [1]. Core CPI, which excludes volatile food and energy prices, is anticipated to rise by 0.4% month-on-month and 2.7% year-on-year [1].
The surge in inflation is attributed to elevated oil prices, driven by the ongoing conflict between the United States and Iran. From the onset of the Middle East conflict on February 28 to the end of April, the price of West Texas Intermediate (WTI) crude oil increased by more than 50%. Although oil prices corrected lower in early May, they remain approximately 40% above pre-conflict levels [1].
Deutsche Bank’s Jim Reid previewed the inflation data, stating, 'our economists expect headline inflation to rise by +0.58% month-on-month, moderating from March’s +0.9%, but still relatively firm.' Reid also noted that the core measure is projected to accelerate to +0.39% MoM from +0.2%, indicating that underlying price pressures remain sticky even as energy-related effects fade. According to Reid, the year-on-year rates would move from 3.3% to 3.8% for headline CPI and from 2.6% to 2.8% for core CPI [1].
The CPI is a key indicator for measuring inflation and is closely watched by traders, as a high reading is generally seen as bullish for the US Dollar (USD) [1]. The Federal Reserve, which targets around 2% year-on-year inflation, has maintained an aggressive stance to tame price pressures, which have persisted due to supply-chain issues and bottlenecks since the pandemic [1]. The upcoming CPI figures are expected to reflect the impact of persistently high oil prices on inflation, and while this is largely anticipated, core inflation figures will be closely scrutinized for signs of underlying price pressures [1].
CONCLUSION
The upcoming US CPI report is expected to show inflation rising to its highest level since September 2023, driven by elevated oil prices amid geopolitical tensions. With both headline and core inflation remaining above the Federal Reserve’s target, market participants are likely to closely monitor the data for implications on monetary policy and the US Dollar.