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If the disinflation story stalled in March, April is about to bury it.
The Bureau of Labor Statistics releases April inflation data at 8:30 a.m. ET on Tuesday — three days before Kevin Warsh is expected to be sworn in as the next Federal Reserve Chair on May 15.
The Cleveland Fed's inflation nowcasting model projects April CPI at 0.45% month-over-month for headline and 0.21% for core, lifting the annual headline rate to 3.56% from 3.30% in March. That would be the highest print since September 2023.
Wall Street consensus sits at 3.7% for headline and 2.7% for core, versus 3.3% and 2.6% in March. The monthly consensus is 0.6% headline and 0.4% core.
But the composition matters more than the level. Energy is back as the dominant inflation driver for the first time since 2022 — a byproduct of the war in Iran that began Feb. 27 and the Strait of Hormuz, which remains shut. A one-off statistical artifact from last year's government shutdown is about to push shelter inflation up by half a percent in a single month. And tariff passthrough, while fading, hasn't fully cleared the goods basket.
For Warsh, the timing couldn't be worse. He inherits a headline print accelerating in the wrong direction, just a month before his first Federal Open Market Committee meeting as chair. The Cleveland Fed's preliminary May nowcast already points to headline inflation accelerating further to 3.89% year-over-year — "a trajectory that would constrain Warsh from easing monetary policy from day one," according to veteran Wall Street investor Ed Yardeni.
Wells Fargo & Co. sees the hottest forecast on the Street: a 0.63% headline jump pushing the annual rate to 3.8%, with a 0.50% core print taking year-over-year core CPI to 2.9%. Goldman Sachs Group Inc. forecasts a 0.58% headline rise to 3.68% annual and a 0.31% core. Bank of America Corp.'s Stephen Juneau pencils in 0.51% headline at 3.7% annual and 0.29% core at 2.7%.
Juneau, in his client note, framed April as the inflection point. He flagged a one-off rent reset as the main accelerant inside core services, with the BLS panel skipped during last October's shutdown now being sampled against year-ago prices instead of October prices. The result, he wrote, will be a much firmer read on rent and OER. Bank of America's initial core PCE tracking sits at 0.23% — a print that would leave annual core PCE stuck at 3.2%.
Goldman Sachs economist Jessica Rindels pointed to sharply higher energy prices as the engine of the headline acceleration, reflecting the surge in retail gasoline since the start of the war in Iran. Rindels warned that "elevated oil prices will keep consumer energy prices elevated," in turn boosting core inflation through services passthrough. Goldman expects core CPI prints around 0.2% over the next couple of months, with risks tilted to the upside if oil market disruptions prove more persistent than expected.
Prediction markets give 3.7% year-over-year inflation a 41% probability as the runaway favorite, with 3.8% at 37%, 3.6% at 16%, and 3.9% at just 5%. On a monthly basis, traders favor 0.6% at 32%, with 0.5% at 30% and 0.7% at 26%.
The longer-horizon markets are even more telling. Polymarket assigns an 82% probability of inflation breaching 4%, a 31% probability of crossing 5%, and a 14% probability of reaching 6%. The crowd has effectively zero conviction that inflation falls back to target this year.
On the Fed path, traders price a 58% probability of zero rate cuts in 2026, with just a 20% chance of a single 25-basis-point reduction. The implied chance of a 25-basis-point hike by the end of the year is priced at 19%. For the June 16–17 FOMC meeting specifically, markets price a 97% probability the Fed holds steady.
Both the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) head into Tuesday's CPI report at record highs.
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