What to expect from April CPI data amid Fed's latest rate hike

All eyes will be focused on the April CPI report set to be released tomorrow morning. Yahoo Finance senior reporter Ali Kanalax, Andrew Kanal joining us now Ali lots of focus whether or not we're going to see significant or really any improvement. What do you think we'll say? Well, the good news is that as far as the estimates go inflation is expected to remain consistent to the levels that we saw in March. But the bad news is is that inflation is still going to be significantly higher than the federal reserve 2% target. So here are the numbers to watch. Year of a year headline inflation is expected to have risen 5% in April. So like I said, consistent with those March numbers on a month over month basis, though, estimates are calling for a bit of an acceleration due to higher gas prices.

So 0.4% in April versus March is 0.1%. Then if you take a look at core inflation which strips out the more volatile costs of food and gas prices are once again pretty on par with March of 5.5% annual gain and a 0.4% monthly gain or the expectations there. So still elevated pricing levels that the Fed would obviously like to see moderate.

But I will say that looking ahead to tomorrow's print, anything that comes in significantly hotter than expected that is going to spook the markets because it just raises those risks that the Fed will once again raise interest rates in June. Yeah, Ali, what's the thought out there on the street just in terms of what this print, how the Fed will be looking at that print, how that's going to potentially play into their decision in June? Well, right now, if we take a look at data from CME Group, markets are pricing in an 80% chance that the federal's leaves those rates unchanged. That's been largely driven by the commentary we saw last week with Fed Chair Jerome Powell saying the central bank could pause its hikes as it assesses that incoming data. On top of that, we did receive revisions to those job numbers from both March and February, which signaled a resilient but cooling labor market, which gave investors further hope the Fed could pause rates. That being said, though, we have heard from analysts at Wells Fargo who said, quote, the path back to 2% will be long and bumpy. We also received a note from UBS late last week that showed that although that there will be risks to the Fed potentially hiking those rates in June, overall, the bank maintained that we likely won't see that. However, depending on the data that we do get tomorrow, along with various divergent opinions from FOMC participants, things could get noisy and noisy could mean volatile.

That's a quote from UBS. So a lot riding on tomorrow has planted something that we'll be watching closely. It certainly will be tomorrow morning before the markets open. Ali, thanks so much.

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