US inflation: the split reaction

plus, the medium-term metric to watch, converging markets, tariffs and more

"The difficulty lies not so much in developing new ideas as in escaping from old ones." - John Maynard Keynes ||

Hello everyone, I hope you’re all doing well! It’s a public holiday here tomorrow, so this newsletter will take a short break, back on Friday.

IN THIS NEWSLETTER:

• US inflation: the split reaction

• Markets: the metric to watch

• The cash scare

• Macro-Crypto Bits: converging markets, tariff countdown, legal pushback

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WHAT I’M WATCHING:

US inflation: the split reaction

Reactions to yesterday’s US CPI release veered between vindication that tariffs won’t move the needle on inflation after all, to a deepening conviction that inflation is coming back.

On a year-on-year basis, core CPI increased by 2.8%, in line with expectations and March’s increase.

The headline CPI increase dipped slightly to 2.3% vs expectations of 2.4%, which would have been in line with March’s climb. This was the lowest since early 2021, before the post-pandemic inflation climb took hold. Lower energy prices helped with the softening, as did slower service price inflation. Excluding housing and energy, services prices – the key driver of inflation in recent months – climbed 2.7%, also the lowest in four years.

(chart via Bloomberg)

Wait, where is the impact from tariffs?