Updated with comments from Federal Reserve vice chair Richard Clarida.*

Woof:

Yep, the US printed a 4.2 per cent year-on-year rise CPI in April and up from 2.6 per cent in March. The core measure, which strips out changes in food and energy prices, is worth noting too — it’s seen as a better gauge of underlying price pressures.

Headline inflation was expected to hit 3.6 per cent, according to Refinitiv. The forecast for core was 2.3 per cent.

Looking at the data, the index for used cars and trucks rose 10 per cent month-on-month, the largest rise since records began in 1953, which — given the semiconductor-related bottlenecks in that sector — perhaps isn’t that much of a surprise. That price pressure should pass as supply chains begin to normalise towards the end of the year. The rest of the inputs were much lower:

Reading the market tea leaves: the allegedly inflation-sensitive Nasdaq has just dropped down 1.4 per cent in pre-market, with the relatively happier-in-inflationary-environments Dow and S&P are also in the red. Gold and bitcoin are also dropping, perhaps surprisingly, at pixel time.

We still think the Federal Reserve will continue to play down the CPI spike as a blip, but Grandmaster Jay and the rest of his crew are in for some testing times over the next few months. *The Fed’s vice chair, Richard Clarida, has just delivered a speech, which emphasises last week’s poor jobs numbers and downplays today’s inflation print. He also echoes Powell’s and Lael Brainard’s message that the move above the Fed’s 2 per cent inflation target is down to “transitory factors”. No signs of a shift in stance, then.