America's Inflation Problem Just Got Harder to Explain Away

Today's inflation report did not deliver a disaster, but confirmation that prices are still rising too fast, at exactly the wrong time. While headline inflation can be blamed on oil, war, shipping routes and bad luck, core inflation is harder to wave away. It tells us whether price pressure is spreading through the economy rather than simply arriving at the gas pump.

Consumer prices rose 0.6% in April, matching expectations, but the annual increase came in at 3.8%, slightly hotter than the 3.7% economists had expected. Core inflation, which strips out food and energy, was more troubling. It rose 0.4% on the month and 2.8% from a year earlier, both above forecasts. However, futures on Wall Street barely flinched after the release of the report, although they remained firmly in the red.

This is despite the Fed now having even less room to sound relaxed. Markets had already stopped betting on rate cuts this year after weeks of repricing. Before the Middle East conflict escalated, traders expected two cuts in 2026. At one point during the conflict, they even briefly entertained the possibility of a rate hike. Today’s CPI numbers will not make that conversation disappear. They strengthen the case for a Fed that stays on hold, speaks carefully, and disappoints anyone still hoping for quick relief from interest rates. And yet markets are already looking past the data to the politics: Kevin Warsh has just been confirmed at the Fed, and investors are betting that this Trump ally will push for rate cuts almost regardless of what inflation is doing.

The war in the Middle East is feeding directly into the cost of living. The ceasefire between the United States and Iran is now, in President Trump's words, on "life support," after Tehran rejected Washington's proposal. The Strait of Hormuz remains closed, keeping pressure on oil markets. Brent is above $100 a barrel, and crude prices are up sharply again today. That kind of oil shock does not stay neatly contained in energy markets: it travels through transport, food, business costs, and household expectations.

The White House knows this, and it also knows that Americans do not grade presidents on the elegance of their macroeconomic explanations. They grade them on the price of groceries, fuel, rent, and monthly payments. That explains the sudden interest in emergency measures. Cutting tariffs on beef imports and floating a 90-day suspension of the gasoline tax are not signs of a president operating from strength. They are signs of an administration trying to create visible relief before economic frustration hardens into political damage. These steps may help at the margin, but they are temporary patches.

The timing is especially difficult for Trump because he is preparing for a high-profile trip to China, with major American executives expected to join him. Treasury Secretary Scott Bessent is already moving through Japan and South Korea, where Washington is pressing its case on currencies, interest rates, and regional economic strategy. Bessent has the unenviable job of looking like the adult in the room.

The administration's Asia push is not irrelevant to inflation. The weak yen, global supply chains, trade policy, and China relations all feed into prices, corporate margins, and market confidence. But for most Americans, this is still brutally simple. If wages do not keep up and prices keep rising, nobody feels better because the Treasury Secretary had a productive meeting in Tokyo.

Markets, for their part, have been oddly resilient, boosted by the prospects of AI. The S&P 500 and Nasdaq closed at records on Monday, lifted by strong earnings and the seemingly endless enthusiasm around artificial intelligence. The Nasdaq 100 is up more than 16% this year, while Europe has lagged badly.

But today's session shows the limits of that enthusiasm. Futures fell before the open, especially in the Nasdaq. Intel, after a huge two-day run, slipped in premarket trading. Hims & Hers dropped after missing revenue estimates and posting a surprise loss. GameStop fell after eBay rejected its $56 billion takeover bid, a sentence that somehow sounds both absurd and completely normal for this market.

Today's economic highlights:

Today's agenda includes: NAB Business Confidence in Australia; Industrial Production in Italy; the ZEW Economic Sentiment Index for the Euro Area and Germany; In the United States, speeches by Fed's Williams and Goolsbee, monthly and yearly inflation rates, CPI, the monthly budget statement, and the API Crude Oil Stock Change. See the full calendar here.

• Dollar index: 98.303
• Gold: $4,705
• Crude Oil (BRENT): $105.2 (WTI) $101.30
• United States 10 years: 4.43%
• BITCOIN: $80,781

In corporate news:

• Palantir met with Ukrainian President Volodymyr Zelenskiy as Ukraine expands its use of AI tools and battlefield data systems to improve drone interception, strike planning and intelligence analysis.
• Equinix will invest more than $190 million to build a fourth Malaysian data centre in Kuala Lumpur, with capacity designed partly for AI and high-performance computing workloads.
• Meta Platforms lost a case at the EU's top court, which said Italy's regulator can require the company to compensate publishers for using snippets of their news articles.
• Amazon launched its first Swiss franc bond offering, reportedly across six maturities, as U.S. cloud companies raise funding for AI infrastructure expansion.
• On Holding raised its 2026 profitability outlook after stronger-than-expected first-quarter sales, helped by successful sneaker launches and growing appeal among younger female customers.
• Tyler Technologies priced an upsized $1.25 billion private offering of convertible senior notes due 2031 and plans to use part of the proceeds for share repurchases and capped call transactions.
• The Carlyle Group and Yum China are among bidders for Jardine Matheson's Asian KFC and Pizza Hut restaurant unit, which could be valued at around $400 million.
• Netflix was sued by Texas over allegations that it collected children's and users' data without consent and designed its platform to be addictive, claims the company denies.
• SES reported an 80% year-on-year revenue jump in the first quarter, supported by growth in aviation connectivity and European infrastructure contracts.
• Vanguard aims to roughly double its European assets to $1 trillion by 2030 by expanding its ETF range, distribution partnerships and regional teams.
• The White House has invited the CEOs of Tesla, Apple, Meta and Boeing to China, but not Jensen Huang of Nvidia.
• OpenAI is expected to save $97 billion by 2030 thanks to its latest deal with Microsoft, according to The Information.
• Simon Property has raised its forecasts.
• General Motors is set to cut hundreds of executive roles to reduce costs, according to Bloomberg.
• ServiceNow is planning to raise $4 billion through a bond issue, according to Bloomberg.
• Google and Apple are rolling out RCS encryption to secure communications between Android and iPhone.
• Johnson Controls is strengthening its presence in Europe with the opening of new centres in Denmark.
• AI chipmaker Cerebras could raise up to $5.5 billion in an IPO that has been scaled up.
• Today's key earnings releases: Constellation Software, Power Corporation of Canada

See more news from UK listed companies here

Analyst Recommendations:

• Applovin Corporation: Phillip Securities upgrades to buy from accumulate and reduces the target price from USD 725 to USD 635.
• Celanese Corporation: JP Morgan upgrades to overweight from neutral with a target price of USD 68.
• Gitlab Inc.: Raymond James downgrades to market perform from outperform.
• Lowe's Companies, Inc.: Citi upgrades to buy from neutral with a target price of USD 285.
• Toast, Inc.: Rothschild & Co Redburn downgrades to neutral from buy and reduces the target price from USD 47 to USD 35.
• Amd (Advanced Micro Devices): Arete Research maintains its buy recommendation and raises the target price from USD 325 to USD 540.
• Apollo Global Management A: Jefferies maintains its hold recommendation and raises the target price from USD 115 to USD 142.
• Applied Materials, Inc.: Citi maintains its buy recommendation and raises the target price from USD 420 to USD 520.
• Block, Inc.: KGI Securities Co Ltd maintains its neutral recommendation and raises the target price from USD 73 to USD 90.
• Bloom Energy Corporation: Barclays maintains its equalweight recommendation and raises the target price from USD 177 to USD 254.
• Circle Internet Group, Inc.: Compass Point Research & Trading maintains its sell recommendation and raises the target price from USD 77 to USD 97.
• Exxon Mobil Corporation: Melius Research LLC maintains its hold recommendation and raises the target price from USD 141 to USD 182.
• Fortinet, Inc.: Daiwa Securities maintains its neutral recommendation and raises the target price from USD 90 to USD 115.
• Hubspot, Inc.: Zacks maintains its neutral recommendation and reduces the target price from USD 284 to USD 208.
• Intel Corporation: Deutsche Bank maintains its hold recommendation and raises the target price from USD 63 to USD 100.
• Kla Corporation: Rothschild & Co Redburn maintains its neutral recommendation and raises the target price from USD 1400 to USD 1865.
• National Storage Affiliates Trust: Citi maintains its neutral recommendation and raises the target price from USD 33.50 to USD 43.62.
• Ovintiv Inc.: Peters & Co. maintains its sector outperform rating and raises the target price from USD 62 to USD 80.
• Qiagen N.v.: Rothschild & Co Redburn maintains its neutral recommendation and reduces the target price from EUR 41 to EUR 32.
• The Clorox Company: BNP Paribas maintains its neutral recommendation and reduces the target price from USD 128 to USD 97.
• The Mosaic Company: JP Morgan maintains its underweight recommendation and reduces the target price from USD 24 to USD 19.