PARIS (Reuters) – Consumer prices (ICC) in the United States increased less than expected in April, according to data published Tuesday by the Department of Labor, which should offer the American Federal Reserve (Fed) more options in the conduct of its monetary policy.

The CPI index released 0.2% in April over a month, while the economists interviewed by Reuters were waiting for a rebound of 0.3% after a contraction of 0.1% in March.

Over one year, the increase in the CPI index is 2.3% in April, a lower pace than expected by consensus (+2.4%), after an increase of 2.4% in March.

By excluding the volatile elements such as food and energy, the underlying consumer price index (“Core CPI”) accelerated at +0.2% in April over a month, against a consensus at +0.3%, after +0.1% in March.

In annual rate, the CORE CPI emerged at +2.8%, as planned by consensus and as in March.

After the publication of this statistic, two of the three main Wall Street indices were in the green, the Standard & Poor’s 500 taking 0.77% and the Nasdaq Composite 1.48%, while the Dow Jones fell 0.38% around 3:20 p.m. GMT.

On the exchange market, the dollar was under 0.57% in front of a basket of reference currencies, while in the bond, the yield of Treasuries at two years was stable, at around 4%.

The term contracts show that traders believe that the American Federal Reserve (Fed) is expected to lower its rates twice this year, before September and October, after the decision made last week to maintain them in a range of 4.25% to 4.50%.

With lower than expected American inflation and the signing of a provisional trade in trade between China and the United States, operators are now betting on a reflux of pressures on households and businesses in the coming months, which distances the prospect of an economic recession and increases the Fed maneuver room.

Rejection of forecasts

Several intermediaries, including JP Morgan Chase, Barclays and Goldman Sachs, have adjusted their forecasts on Tuesday to reflect a more favorable economic trajectory.

JP Morgan economists believe in particular that the risk of recession in the United States fell to less than 50%, those of Barclays no longer anticipate a recession. Goldman Sachs lowered his probability of recession in the United States to 35% against 45% before.

JP Morgan Chase and Barclays previously expected that the increase in customs duties hardly affect consumers and businesses, thus slowing down consumption and economic activity.

The financial markets have also re-subjected their anticipations after the Sino-American agreement on customs duties, considerably reducing forecasts that the Fed should start lowering its rates in July to compensate for the economic slowdown.

“We feared that customs duties would climb inflation, and this may still be the case, but today’s data reassures at least investors: inflation is still in the right direction,” said Jake Dollarhide, Managing Director of Longbow Asset Management.

(Written by Claude Chendjou, with the contribution of Ann Sapphire and Caroline Valetkevitch, edited by Augustin Turpin and Kate Entringer)

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