The April Consumer Price Index (CPI) data released this week brought a breath of relief to markets and policymakers alike. While inflation hasn’t disappeared, signs of a slowdown—particularly in core and supercore inflation metrics—suggest that the Federal Reserve’s aggressive tightening cycle may finally be cooling price pressures across the economy.

Below, we unpack the latest figures and what they could mean for consumers, markets, and the Fed’s next moves.

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Headline CPI: A Softer-than-Expected Print

• CPI (Month-over-Month): +0.2% (est. +0.3%; prev. -0.1%)
• CPI (Year-over-Year): +2.3% (est. +2.4%; prev. +2.4%)

The April headline CPI rose by 0.2% month-over-month, below consensus expectations of 0.3% and reversing the previous month’s slight decline. On a year-over-year basis, inflation moderated slightly to 2.3%, marking modest progress toward the Fed’s 2% target.

The monthly unrounded figure—+0.221%—adds clarity to the trend, indicating that while prices are still rising, the pace remains contained and directionally positive for those hoping for rate cuts.

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Core CPI: Cooling but Sticky

• Core CPI (Month-over-Month): +0.2% (est. +0.3%; prev. +0.1%)
• Core CPI (Year-over-Year): +2.8% (est. +2.8%; prev. +2.8%)
• Core CPI Unrounded (M/M): +0.237% (prev. +0.057%)

Core inflation, which strips out volatile food and energy prices, also came in below expectations at 0.2% on the month. That said, the unrounded figure of 0.237% shows that core prices are still running a bit hot beneath the surface. On an annual basis, core CPI remains stuck at 2.8%, the same as in March.

This stagnation in year-over-year core inflation suggests that while headline inflation may be easing, the underlying components—especially services—remain persistently elevated.

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Supercore CPI: Positive Reversal, but Not Yet Encouraging

• Supercore CPI (Month-over-Month): +0.209% (prev. -0.243%)
• Supercore CPI (Year-over-Year): +2.743% (prev. +2.864%)

“Supercore” CPI—closely watched by the Fed as it focuses on services excluding housing and energy—bounced back in April, rising by 0.209% after a notable decline in March. On a year-over-year basis, this metric also showed improvement, easing to 2.743% from 2.864%.

This cooling trend in supercore inflation is a welcome development. While still above the Fed’s comfort zone, the reversal signals that wage-driven service inflation could be starting to ease.

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Wages: Real Earnings Growth Holds Steady

• Real Average Hourly Earnings (Y/Y): +1.4% (prev. +1.4%)
• Real Average Weekly Earnings (M/M): +1.7% (prev. +1.1%)

For workers, the news is increasingly positive. Real (inflation-adjusted) wages continued to grow, with average hourly earnings up 1.4% year-over-year and weekly earnings rising 1.7% month-over-month. With inflation easing and nominal wage growth holding up, consumers may find their purchasing power gradually improving.

This could support consumer spending in the near term, helping the economy maintain momentum even as the Fed maintains a higher-for-longer stance on interest rates.

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What It All Means: A “Not Too Hot, Not Too Cold” Scenario

April’s CPI report threads a delicate needle: inflation is cooling, but not collapsing. Here are a few key takeaways:

• Market reaction: Bond yields fell and equities rose on the news, with investors interpreting the softer print as a green light for potential Fed easing later in the year.
• Fed implications: While this report alone won’t be enough to trigger an immediate pivot, it strengthens the case for a pause in rate hikes. If this disinflationary trend persists through the summer, rate cuts could be on the table by Q4.
• Cautious optimism: Despite the positive trends, persistent core and supercore inflation underscore that inflation’s last mile may be the hardest.

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April’s inflation report provides encouraging evidence that price pressures are easing across the board. Headline, core, and supercore measures are all moderating, while real wage growth is offering relief to consumers.

However, the Fed will likely want to see several more months of consistent progress before changing course. For now, the data support patience, not panic—and that’s a win in a still uncertain economic environment.