NEW YORK (Reuters] – U.S. consumer inflation slowed dramatically in April due to lower gasoline prices. Although it seems that inflation is at its peak, the Federal Reserve will continue to hold the pedal to keep demand cool.

According to the Labor Department, 0.3% was the most recent consumer price index increase since August 2005. This is the lowest gain in the past three months. This contrasts sharply with the 1.2% monthly increase in CPI for March which represented the biggest advance since September 2005. STORY: TABLE:

MARKET REACTION:

STOCKS: S&P e-mini futures reversed early gains and were down 0.99%, pointing to a weak open on Wall Street

BONDS. Yields for benchmark 10-year bonds jumped to 3.0640%. TREASURY YIELD: Two-year Treasury yields increased to 2.794%

FOREX: 0.1% more for the currency

COMMENTS

ROBERT PAVLIK SENIOR PORTFOLIO MANGER, DAKOTA WEALTH, FAIRFIELD CONNECTICUT

    “The headline number was a little higher than expected. It was the core that caused the problems, with a heat index of about twice what we expected. It is possible that inflation has not peaked. It seems that this is a concern to the market. As a result, futures were sold and are continuing to be sold.”

    “What you’re seeing there is continued fears the Fed is going to have to act aggressively to combat inflation. Fed has to act quickly against inflation. Both inflation and moves made by the Federal Reserve will cause a slowdown of the U.S. Economy. This is undisputed. Because they have to spend their money elsewhere, people are less likely to spend discretionarily.

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CAMBRDIGE GLOBAL PAYMENTS, TORONTO

“Far stronger than expected, especially on the core measure, suggests that underlying inflation pressures remain quite strong and quite persistent. We are seeing a re-anchoring of the front-end of the interest rate curve, I’m seeing June expectations around 70 basis points so you are looking at least at 2% in additional tightening over the next four meetings. So the dollar is just steamrolling everything else and risk appetite is getting demolished here, we have seen equity indices sell off sharply, your high-beta or commodity-linked currencies are selling off as well and that flight to the dollar is continuing here.”

BRIAN DORST, SENIOR TRADER, THEMIS TRADING LLC, NEW JERSEY

“The data was hotter than expected, and markets turned on it — month over month was up a touch, excluding energy, so futures turned. But the Fed will stay the course, because the estimates aren’t that far off. It’s not extremely shocking, but it shows that inflation is very much front center.”

GREG BASSUK, CHIEF EXECUTIVE OFFICER, AXS INVESTMENTS, NEW YORK CITY

“The data underscores that inflation and rising prices likely has not yet peaked. The Fed’s aggressive approach will fuel fears about a possible recession. Investors are likely to worry. We believe this will be a major negative for today’s markets.

“We definitely think that it increases the likelihood of more aggressive rate hikes in part because inflation seems to not be slowing down but on top of that, we also have significant concerns related to oil and gas supply chain, with the war in Ukraine, as well as with the China lockdown on COVID. So with supply chain concerns and a potentially more aggressive Federal Reserve policy around tightening and raising rates, the likelihood of not only a U.S. but a global recession is definitely going to be weighing heavily on the markets.”

JAY HATFIELD, CHIEF EXECUTIVE OFFICER, INFRASTRUCTURE CAPITAL MANAGEMENT, NEW YORK

    “CPI printed slightly hot versus expectations. Our forecast continues to show that inflation won’t slow down significantly until spring. We expect prices for energy to rise and increases in rent and housing costs to decrease.

THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL, NEW YORK

“It was a mixed bag. It’s not as high as last month so it could be that inflation has peaked. On the other, it’s worse than expected. There’s something for everyone to hate, and something for people to love.”

“The good news is that the numbers came down off of last month. They are slightly higher than we expected. The driver of the decline in used car prices is now down by 4/10ths percent. Markets are mixed because this is a good development. So inconclusive, but trending in the right direction.”

“NASDAQ (futures) are down the most because rates are going up in anticipation that the Fed will have to stay pretty aggressive for some time. Tech and NASDAQ are most affected by the new 3.04% yield on 10 years. However, it is not a balanced mix. Good news it came in lower than last month on both fronts, bad news is higher than expected for consensus.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“I’m a little disappointed in inflation number. Although it shows some moderation and signs of inflation peaking, the core rate remains a bit high. We could see a back-up in yields but I don’t think they’ll go back to the highs registered on Monday.”

“The bond market remains skittish. I think the Fed will be able to fight inflation, but while they will bring it down, but there are always outside factors, such as the (Russia-Ukraine) war and if a new variant should show up in the (United States).”

“I see a peak occurring, but there’s always that outside chance of curve-ball, such as a full escalation of the war between Russia and Ukraine, dragging NATO into the picture. Worst case scenario energy prices will go higher but not so much that it will be meaningful.”

“But I think we’ve reached that peak. We could see still higher prices for oil and grains, but they will be limited.”

“The Fed will continue with (50 basis point) rate hikes for the next three meetings, and a quarter of a point for the next few meetings. But I don’t think they’ll go much beyond that. The important thing is to eradicate inflation, but it won’t happen overnight. The tough talk from the Fed will continue.”

ROSS MAYFIELD CHIEF STRATEGIST, CHIEF PRIVATE WALTH MANAGEMENT

The data shows that there was a bit of an upside to all of these numbers, and the peak inflation story must be reexamined.They’re pretty much locked in to rate increases of 50 basis points by the Federal Reserve. While the data may surprise some, it still represents a decline from March. In a way, it’s clear that they are on the right track and will stick to their plan.”Ultimately, it is difficult to determine if tech has reached its bottom. There could still be downsides. “We just anticipate the volatility to continue.”

PAOLO ZANGHIERI SENIOR ECONOMIST, GENERALI InvestMENTS, MILAN

The base effects of headline and core inflation fell as expected. However, the monthly price increase was higher than anticipated, which confirms the belief that it will be a long time before inflation returns to acceptable levels. The steady increase in shelter inflation (rents) is even more worrying, which is due to the rapid rise in house prices. While higher interest rates may be cooling the construction industry, shelter inflation which accounts for more than a third total core inflation will remain strong for some time. The unexpected rise in vehicle prices also helped to boost core inflation. This is because supply and demand are constrained by bottlenecks. Risks for inflation remains tilted to the downside in part due to factors largely beyond the Fed’s control such as commodities and global goods production chains, heavily impacted by the lockdowns in China Overall today’s data add to the case of the strong frontloading called for by Powell in the last meeting, who also suggested the possibility of two more 50bps rise in June and July. This will raise concerns about a possible recession and may cause the Fed to reduce its tightening in the future.

(Compliled by the global Finance & Markets Breaking News team)