Nick Timiraos: Two more CPI reports are needed to strengthen confidence in rate cuts

Wall Street Journal reporter Nick Timiraos said: Wednesday's inflation data should be a relief to Federal Reserve officials because it shows that prices and economic activity have not re-accelerated. On its own, the April CPI report is not enough to change the Fed's expectations on whether and when to start cutting interest rates. The significance of the April CPI data is that it retains the possibility of a rate cut later this year and calms some concerns that the Fed may need to further open the door to rate hikes. Most economists currently expect the Fed to cut interest rates this year, but there are differences on when to cut interest rates. It may take two more CPI reports to strengthen officials' confidence that inflation can return to lower levels before the COVID-19 pandemic, so the Fed may not cut interest rates before September. Millions of Americans are still facing huge price pressures. Gasoline prices have pushed up overall inflation, while housing costs continue to rise. The year-on-year increase in rents has slowed from a month ago, indicating that a key driver of inflation is slowing. Grocery and vehicle costs also fell slightly in April from March, and health care price increases slowed.