[Reuters Breakingviews] Tame April CPI rise doesn't yet capture tariff impact

May 13 (Reuters) - U.S. consumer prices rebounded moderately in April, but inflation is likely to pick up in the months as tariffs boost the cost of imported goods.

The consumer price index CPI increased 0.2% last month after dipping 0.1% in March, which was the first decline since May 2020, the Labor Department said on Tuesday. Economists polled by Reuters had forecast the CPI would rise 0.3%. Year on year, the CPI climbed 2.3%, vs a 2.4% rise in the 12 months through March.

Excluding the volatile food and energy components, the CPI rose 0.2% after gaining 0.1% in March. The so-called core CPI inflation increased 2.8% on a year-on-year basis in April after rising 2.8% in March.

The data likely only captures tariffs imposed before President Donald Trump's April 2 "Liberation Day" announcement.

MARKET REACTION:

STOCKS: U.S. stock index futures EScv1 turned 0.09% higher, pointing to a steady open on Wall Street

BONDS: The 10-year U.S. Treasury yield US10YT=TWEB slipped to 4.4531% while the two-year yield US2YT=TWEB fell to 3.973%

FOREX: The dollar index =USD extended slightly lower and was off 0.3%; the euro EUR= extended 0.44% higher

COMMENTS:

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The numbers were a little higher than I was looking for, but you know, year-to-year 2.3%, that's not bad.”

“The report basically indicates that the Fed needs to be very cautious and that the stand that they have taken is probably the right course, for now.”

“Inflation remains sticky, and the feds need to be vigilant.”

“The Fed has embarked on what seems to be the right course and unless there's any real movements in terms of trade war ending by June, it looks like a June rate cut remains in question.”

“I would say (tariffs) will show up in the data sometime in the latter part of June, July, into August. So, we're looking for those numbers to be ugly.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

"While the headline number for inflation was better than expected, there are indicators that tariffs have already pushed prices higher. Audio equipment and furniture had unseasonably large increases in prices. Turning down the temperature of tariffs is good as the price effects would start seeping into the consumer basket pretty quickly. The trade reset with China might mean the Fed can go back to business as usual and gradually resume cutting rates later this year.

JORDAN RIZZUTO, CHIEF INVESTMENT OFFICER, GAMMAROAD CAPITAL PARTNERS, NEW YORK

"Looking at the immediate market reaction, this does not seem to be a game changer in any major way. In terms of inflation expectations and monetary policy, we're very much in the same place that we were before the report came out. This wouldn’t materially shift the outlook that Chairman Powell shared with us a few days ago with regards to monetary policy.

"We expect the Fed to continue to be in a wait-and-see mode until we see some further materialization of pricing pressures that may come from the new trade policies that are that are being implemented.

"We've got a few factors at play. What comes at the conclusion of that 90-day window? There's still quite a bit of uncertainty there and the choppiness in how the short end of the interest rate curve is being traded in the futures market is reflecting that."

JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA

"It's good news. It confirms the Fed could cut two times this year, and I think that's good for stocks. I think investors have grown frustrated that inflation has proved sticky. There's been a fear that tariffs are going to push inflation higher, and they may still, but today's data at least gives investors a sense of relief that inflation is still moving in the right direction… A read like today could give investors hope that the Fed may not cut two times this year, they may cut three times this year."