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INTRADAY ALERT: "inline" April CPI at 0.4% MoM enough to keep Fed "paused." Details mixed, but used cars acceleration largest driver after housing. 40% of CPI basket in outright deflation, up from 33%.

NEW: Notice new section (below): added so you can see our tactical ideas

The April Core CPI came in at 0.41% MoM, inline with consensus 0.4% and better than the feared "hot" figure clients were bracing for. But today's release was not a tie breaker, either.

Foremost, we think this report is good enough to keep the Fed in "pause" mode, meaning, we do not expect a June hike. The bar to hike, as we noted previously, has been raised because of the spreading ripples of the regional bank crisis. And today's report did not warrant raising the probability of a hike in June. Fed funds futures fell across the board. The odds of a June hike fell to 1% today from 12% yesterday. And about 10bp has come out of the December 2023 forecast. In other words, this report added incrementally to the "Fed is done" camp. Most significantly, 40% of the CPI basket (by weight) is in outright deflation. This is a huge development:- Diffusion was 33% in March, big jump in April- 10-yr average is 38%, so this shows inflation certainly cooling- Housing and Food are not "deflating" even though real-time measures show they are- That would add another 50% or so when they do The entire 0.41% increase in Core CPI MoM was due to 3 components:- Shelter ex-hotels +0.23- Used ...

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