Report: Climbing CPI Could Force More Fed Rate Hikes

Durable U.S. inflation last month could test the Federal Reserve.

As Bloomberg News reported Saturday (April 8), upcoming government data is expected to show a 0.4% increase in the core consumer price index (CPI). 

Though lower than the 0.5% gain for the previous month, the report notes that this increase would mirror the average for September through February, keeping figures high and possibly leading to another rate increase next month.

While the CPI has fallen along with energy prices, Bloomberg said, those costs could begin to rise again due to OPEC’s recent reduction in oil production. 

“If that results in persistently rising gasoline prices, it could offset any disinflation gains in the next few months,” Bloomberg Economics said.

The report came two days after the head of America’s biggest bank warned of a recession on the horizon.

The banking crisis is “just like another weight on the scale” exacerbating the pressures of quantitative tightening (QT), higher inflation and the war in Ukraine, JPMorgan Chase CEO Jamie Dimon told CNN Thursday (April 6).

“We are seeing people reduce lending a little bit, cut back a little bit, pull back a little bit,” Dimon said. “It won’t necessarily force a recession, but it is recessionary.”

He added that this banking crisis differs from the 2008 financial crisis because it involves just a few banks and a particular problem, and the Fed took drastic steps to ease their issues.

But at the same time, Dimon argued the crisis will have repercussions in the form of new regulations. He said that while changes are needed, regulators should “take a deep breath” before adding to existing rules.

Meanwhile, recent research by PYMNTS finds that consumers expect high inflation to persist until October of next year.

That’s a change from findings in July, when consumers projected inflation would dip down to 2021 levels in April 2024. By February, that date was pushed back to October 2024.

“Rather than illustrating a major sentiment of progress, this finding implies that consumers expect inflation to last at least a year and a half,” PYMNTS wrote. 

“And if high prices on essentials such as food continue through that span, the economic picture will remain turbulent for many.”