After Tuesday’s April Consumer Price Index report, the path Warsh inherits looks nothing like the one Trump campaigned for.
The headline Consumer Price Index rose 3.8% year-over-year in April, topping the 3.7% consensus and marking the hottest reading since May 2023, as the Strait of Hormuz energy shock fed through the consumer basket.
Core inflation re-accelerated to 2.8%, also above expectations, while core services excluding shelter, the Fed’s preferred underlying gauge, jumped to 0.5% month-over-month.
Within minutes of the print, fed funds futures executed a sharp hawkish repricing.
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Inflation Jumps To 3.8% In April, Kills Fed Rate-Cut Hopes
Rate-Hike Odds Jump After Hot Inflation Print
According to CME FedWatch, traders are now pricing a 51% probability of a Fed rate hike to the 3.75-4.00% range by the Jan. 27, 2027, meeting, and over 80% by April 2027.
Cut probabilities for 2026 have effectively been wiped out.
FOMC Meeting Date
1 cut (-25 bps)
Hold at 3.50%-3.75%
1 Hike (+25 bps)
06/17/2026
2.36%
97.64%
0.00%
07/29/2026
4.50%
95.50%
0.00%
09/16/2026
0.00%
96.00%
4.00%
10/28/2026
0.00%
80.50%
19.50%
12/09/2026
0.00%
62.28%
37.72%
01/27/2027
0.00%
48.50%
51.50%
03/17/2027
0.00%
29.21%
70.79%
04/28/2027
0.00%
18.50%
81.50%
06/09/2027
0.00%
19.18%
80.82%
07/28/2027
0.00%
22.50%
77.50%
09/15/2027
0.00%
32.72%
67.28%
10/27/2027
0.00%
77.50%
22.50%
12/08/2027
0.00%
51.89%
48.11%
Source: CME FedWatch
Bank of America: The Fed Is ‘Running Out Of Excuses’
Bank of America economist Stephen Juneau didn’t mince words in a note to clients Tuesday, highlighting that the Fed is “running out of excuses.”
“Our read-through to core PCE inflation is problematic for the Fed, even if we ignore the 4-5 basis point one-off housing boost,” Juneau wrote. The bank is now tracking April core PCE, the Fed’s preferred inflation gauge, at 0.30% month-over-month and 3.3% year-over-year.
The most uncomfortable detail in the report wasn’t energy, where the Hormuz blockade did most of the damage with a 3.8% monthly jump and a 17.9% year-over-year surge. It was services.
“Core services inflation was uncomfortably elevated,” Juneau wrote. “Investors should look through the outsized housing print, which was payback for the effect of the shutdown on the October ...
