Fed gets inflation relief as CPI slows, teeing up September rate cut

U.S. inflation pressures eased across the board last month, following on from a hotter-than-expected producer prices report, suggesting the Federal Reserve's months-long battle to reduce consumer price pressures is starting to bear fruit. 

The headline Consumer Price Index for April was pegged by the Commerce Department at 3.4%, down from the prior month's tally of 3.5% and matching Wall Street's consensus forecast.

On a monthly basis, inflation edged 0.3% higher, slower than the 0.4% gain in March and besting Wall Street's 0.4% forecast.

So-called core inflation, which strips out volatile components like food and energy, slowed to an annual rate of 3.6%, the lowest in more two years and also better than Wall Street's 3.6% forecast. 

The monthly reading of 0.3% matched Wall Street forecasts of 0.3% and was just inside the March reading of 0.4%.

U.S. stock futures powered higher in the wake of the data release, with contracts tied to the S&P 500 suggesting a 26-point opening bell gain and those linked to the Dow suggesting a 156-point advance.

The rate-sensitive Nasdaq, meanwhile, was marked for a 105-point opening bell gain.

Benchmark 10-year Treasury note yields fell 6 basis points following the data release to change hands at 4.351%. Two-year notes were pegged 10 basis points lower at 4.712%, around 12 basis points higher from prior to the data release.

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The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.55% lower at 104.44, the lowest in nearly two months.

CME Group's FedWatch now suggests little chance of a Fed rate move over the next two policy meetings in June and July, but now pegs the chances of a September rate cut at around 68%.

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