U.S. inflation stood at 8.3% in April: is 75-bps back on the table?

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on May 11, 2022
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  • U.S. inflation was up 8.3% in April from a year ago, versus 8.1% expected.
  • Economist Mohamed El-Erian commented on the inflation data for April.
  • inflation has resulted in a 2.6% decline in real earnings over the past year.

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U.S. inflation was up 8.3% in April from a year ago, reported the Bureau of Labour Statistics on Wednesday. The reading represents a marginal decline from March.

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Economist reacts to the inflation reading for April

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Still running at about a forty-year high, famed economist Mohamed El-Erian doesn’t see inflation as related only to the Ukraine war or any single factor for that matter. On CNBC’s “Squawk Box”, he said:

It’s just a matter of time until we talk about a cost-of-living crisis. Everybody’s focused on the headline number, but look at the core 6.2% and look at the composition of inflation that suggests there are many drivers now.

The Dow Jones estimate was for the consumer price index to be up 8.1% in April. Still, the S&P 500 index is up nearly 1.0% on Wednesday.

El-Erian’s outlook on a 75-bps increase in interest rates

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Earlier in May, the U.S. central bank said it wasn’t actively considering a 75-bps increase in interest rates, at least for the next couple of meetings. But El-Erian is against such a stance.

You can’t say a 75-bps is off the table. You can’t say neutral rate is 2.0% to 3.0%. You have to keep your options open. So, the Fed needs to be more open-minded, not try to just give us good news but be brutally honest about the situation.

Average hourly earnings have gone up 5.5% over the past year, but inflation has still resulted in a 2.6% decline in real earnings over the same period.

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