- The U.S. Bureau of Labor Statistics (BLS) is expected to release the April Consumer Price Index (CPI) soon, with a forecasted month-on-month increase of 0.6% and an annual increase potentially expanding to 3.7%, reaching the highest point since September 2023, indicating that inflation remains significantly persistent.
- Influenced by geopolitical tensions in the Middle East and conflicts involving Iran, international oil prices in March temporarily exceeded $100 per barrel. The rising energy costs are rapidly being passed on to gasoline, diesel, and aviation fuel, with secondary effects beginning to spread to a broader range of goods and services.
- The core CPI data has been affected by data collection omissions due to the previous federal government shutdown. This month will see a technical upward revision of the rent index, and the underlying upward pressure on inflation is further strengthening market expectations that the Federal Reserve (Fed) will maintain the current interest rate range of 3.50%-3.75% until 2027.
Energy Price Shocks and Structural Inflation Transmission
After recording a significant month-on-month increase of 0.9% in March, the expected month-on-month growth rate of the April CPI has slightly fallen to 0.6%. However, within the overall inflation structure, the driving effect of the energy category remains central. Although the oil price fluctuations triggered by previous geopolitical conflicts have eased following a ceasefire agreement in early April, the absolute value of crude oil prices remains high. This cost pressure is fully reflected in North American retail gasoline and diesel prices. More critically, the energy premium is transforming into a systemic increase in logistics and transportation costs, suggesting that commodity prices may face sustained upward pressure in the coming months. After a relatively stable period, the food category is expected to see a significant upward turning point in inflation data due to increased agricultural production costs caused by disruptions in fertilizer supply chains, affected by shipping blockages in the Strait of Hormuz.
Technical Revisions in Core Inflation and Underlying Resilience
Excluding the highly volatile food and energy items, the April core CPI is expected to rise by 0.3% to 0.4% month-on-month, with an annual expectation reaching 2.7%, slightly rebounding from March's 2.6%. This change in data not only reflects the actual supply and demand relationship in the macroeconomy but also includes a key technical factor. Due to a 43-day federal government shutdown last year, the U.S. Bureau of Labor Statistics (BLS) missed some rental data in its rotational sampling survey. The carry-forward imputation method used at the time temporarily lowered the statistical values of housing rents and owners' equivalent rent (OER). With the reintegration of actual survey data in April, systematic technical compensation is expected to contribute approximately 10 basis points (bps) to the upward movement of the core CPI. Additionally, healthcare service costs, after a previous decline, are also showing a rebound trend, jointly forming the underlying support for core inflation.
Tariff Policy Dynamics and Retail Pricing Power
In the core goods sector, the Supreme Court (SCOTUS) overturned the comprehensive tariff policy implemented by the current administration in February this year. This ruling substantially reduced the statutory costs of imports at the macro level. However, there is significant lag and asymmetry in transmission at the micro-enterprise level. Data from Pantheon Macroeconomics shows that facing still high operating costs and a complex geopolitical supply chain environment, major North American retailers are more inclined to convert the profit margin from tariff removal into their own gross profit recovery rather than directly reducing end-product prices. This means that the tariff dividend has a very limited downward pull on the consumer price index, and the cycle of commodity deflation may be nearing its end.
Political Cycles and Monetary Policy Constraints
As the countdown to the midterm elections in November 2026 continues, persistently higher-than-expected inflation data is reshaping the political landscape in Washington. One of the core campaign promises of the incumbent president for re-election in 2024 is to stabilize prices, but the actual perception of living costs by the resident sector remains under pressure. Research from Loyola Marymount University indicates that the average working-class is not sensitive to fluctuations in core CPI; what truly affects their consumer confidence are the absolute prices directly reflected at gas stations and supermarket shelves. In this context, the Federal Reserve's (Fed) policy space is strictly constrained. Facing strong non-farm employment data and stubbornly high inflation indicators, the Federal Open Market Committee lacks economic justification to initiate an easing cycle in the short term, and the long-term high-interest rate environment is becoming the baseline assumption for financial markets.
