CPI Report Revealed: Will it Limit Fed From Cutting Interest Rates?

• The Consumer Price Index rose 3.8% in April, compared with expectations for a rise of 3.7%
• Chances of another interest rate cut by the Fed this year are dropping considerably, according to CME Group
• The Next Federal Open Market Committee (FOMC) meeting is scheduled for June 16-17, 2026

The latest Consumer Price Index (CPI) report revealed Tuesday that the United States is still fighting a steep inflation battle. The Consumer Price Index rose 3.8% in April, compared with expectations for a rise of 3.7%, and up from 3.3% in March. Energy prices accounted for 40% of the increase, while shelter and food also surged. Odds of a Fed interest rate cut are dropping, while inflation is climbing, worrying several economists.

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The Federal Reserve’s War on Inflation Rages On

According to CME FedWatch, markets on Tuesday morning were pricing in a nearly 98% chance that the Fed will hold rates steady at its next meeting in June and through most of 2026. However, after the CPI report and looking out to December, there’s now a nearly 30% chance of a rate hike. The Federal Reserve will next meet in June to decide on if it will raise or lower interest rates.

By then, a new Fed Chair may also be in charge, as current chair Jerome Powell’s terms expires later this May. He has opted to remain on the board as a governor, however, Trump pick Kevin Warsh could be set to take chairmanship before the term ends. Warsh won his senate confirmation today to join the banking committee, the next step towards being voted on by the group to become Fed Chair.

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Will the Fed Cut Interest Rates Next Month After This CPI Report?

Several economists are still in belief that the Fed will be cautious after the latest CPI report. Stephen Brown, chief North America economist for Capital Economics, said Tuesday that pressure on core inflation is “still a bit too strong for comfort,” and the Fed “is likely to be concerned by renewed signs of food inflation accelerating, given the risk that higher gasoline and food prices together will further boost households’ inflation expectations.” Furthermore, Joe Brusuelas, chief economist for RSM, told the media that ““We’re not getting rate cuts this year.”

With inflation still a topic of debate and remaining above desired levels, the Fed may remain hesitant to cut rates. There is even some talks of a small uptick in rates to help in the offense against inflation. The ongoing war between the US and Iran remains a catalyst for rising inflation, according to the CPI report. And with Trump’s latest comments on a potential peace deal with the Middle-Easter nation, it doesn’t appear an end is in sight.

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