Inflation rose 8.3 percent since last April, slightly hotter than analyst expectations of 8 percent. This hotter-than-expected data comes a day after President Biden outlined his plan to tackle inflation, calling rising prices his 'top domestic priority.' Lindsey Piegza, Chief Economist, Stifel, joined Cheddar's Opening Bell to discuss.

Opening Bell

Inflation Up 8.3% in April, Remains Near 4-Decade Highs

Let's bring in lindsey Piegza, chief economist at Stephenville Lindsay, just want to get your take on today's CPI I read, did it match your expectations? Albeit it did not match kind of the general consensus, it was in line with our expectations. While inflation remains elevated on a nominal level, what we are seeing is at least some improvement on an annual basis, slightly below what we saw last month. Now the market is anxious to call a peak in inflation and I'm hesitant to do so with this morning's report given we do expect additional price pressures to be coming down the pipeline as a result of ongoing conflict overseas, as well as a 2nd and 3rd round of shutdowns on an international basis. But again, the reprieve that we saw this morning, no matter how temporary or small, certainly is a welcome step in the right direction. Yes, certainly don't think that we are at a peak. When you look at certain underlying kind of numbers in this report, I look at shelter costs, add up being that being up half a percent, even food that rose about 9/10 of a percent. But generally when you kind of take all that into effect here, what do you think this report suggests about inflationary pressures right now in the US if we're not peeking are we maybe getting closer to a peak, increasing at slower rates? What are we looking at? Well, again, we do see that inflation improved in this morning's report, it accelerated at a slower pace of ascent. But when we look at the causes the root causes of inflation, much of this is still stemming from the supply side of the equation meaning supply chain disruptions resulting in the aftermath of Covid 19 And as a result of the Russia Ukraine conflict. So when we look at those factors, neither of which seem to be abating as of yet, in fact, industry insiders tell us that because of the 2nd and 3rd round of shutdowns that we've seen in china, specifically, the supply chain disruptions are actually as intense or maybe even worse Than they were compared to the lockdowns of 2020. So the pain of that most recent factor has not yet filtered into the inflation numbers. It takes time months for those factors to be measured into the inflationary indices. And so while again we are seeing somewhat improvement in this morning's numbers, it's likely that we continue to see inflation intensify as we move towards the end of the year. I'm glad you bring up the supply side kind of factor to inflation because that truly is what is driving inflation and we focus so often on what the Fed is doing and how the Fed is gonna bring down inflation. But the Fed only has a tool to tamp down the demand side of inflation right demand destruction, so to speak here, not to really factor anything when it comes to production. What can be done on that front and is, you know, the administration kind of responsible for doing more corporations. I mean, what needs to be done to improve supply side pressures that are on inflation and who, who, who can kind of have the leverage to change that? Well, it's a complicated question because first of all looking at it from the Fed's standpoint, you're you're correct. Monetary policy typically raises the cost of capital in an attempt to tap down consumption, tap down investment and as a result, domestic activity slows and we see more benign inflationary pressures. But this time around, raising the cost of capital does little to address price pressure stemming from as we just talked about supply side issues, supply chain constraints or international conflict. So this renders traditional policy monetary policy metrics less effective in fighting inflation. So then we turn to the fiscal side of things. Fiscal policy certainly can help address some of these constraints. We can see investments in infrastructure helping to ease congestion at ports or other areas of that sort. When we look at products coming to the shore line, we see commercial train carriers and trucks in short supply and overloaded. So again, putting investment in place that can ease some of these constraints can certainly be a policy initiative. I'm not yet convinced that the biden administration will take some of those steps right now, it seems as if the biden administration is more focused on the policy aspects of taxes and making sure that corporate America does not raise prices or or quote price gouge. But again, there are policy metrics that could have a legitimate influence in reigning in some of these cost pressures in that vein. Obviously the president gave a speech yesterday really talking about inflation and how inflation is his top domestic priority. I want to give you a bit of a sound bite from the president's speech yesterday and get your read on and on the other side, take a listen, America's in a stronger position to meet this challenge than just about any other country in the world. So you heard that biden essentially claiming that the US is better suited to handle inflation than anyone else around the world. And if you look at inflation in other countries, I guess there is some truth to that, but the reality is we take longer to pass kind of legislation or make moves than compared to other other countries in some respects. Do you think that this is in line with the reality? In terms of America truly being better, it's a position and better to handle inflation than any other country? Well, I, I think the reality is that the American consumer and American households are already feeling the pressure of inflation and so they're, they're very dramatically looking for some sort of lasting reprieve. When we look at the household balance sheet, about 20% of that is being sanctioned off to higher energy costs utilities filling up the family car when we talk about the average price of gasoline, well over $4 across the country, assuming a 20 gallon tank two car family filling up 2 to 3 times a month. You're talking about siphoning off hundreds more a month just to fill up the family car. And as inflation continues to eat into the average purchasing power of consumers, Yes, wages are positive on a nominal basis, but they're not keeping up with inflation. So real wage growth is negative and that's limiting consumers ability to go out into the marketplace. So at this point, I really don't see the american consumer or american household in a strong position to whether a further bout of inflation, Lindsay's really quickly here. I've got only like five seconds. When do you see inflation really start to impact this discretionary spending? It already is. We're seeing the consumer very dramatically lose momentum and as prices remain high and real income as I mentioned, remains negative. This is going to continue to undermine a momentum on the consumer part. It looks like we are seeing that in earnings reports, Lindsay really appreciate your time, lindsey Piegza, chief economist at Stifel