Weekly Market Commentary May 19, 2025

The Consumer Price Index (CPI) for April rose 0.2% month-over-month and 2.3% year-over-year, in line with expectations. Core CPI, which excludes food and energy, also increased 0.2% on the month, signaling persistent underlying inflation pressures despite a broader disinflationary trend. Shelter costs remained a key driver, though their pace of increase has moderated slightly, offering some relief to policymakers.

U.S. retail sales rose just 0.1% in April 2025, slowing sharply from March’s 1.7% gain. The boost from pre-tariff vehicle purchases faded, and core retail sales fell 0.2%. Economic uncertainty and stock market volatility led households to cut discretionary spending, despite strong wage growth and a resilient labor market.

Producer Price Index (PPI) data added a deflationary counterpoint. April’s PPI unexpectedly declined by 0.5% month-over-month, the sharpest drop since October 2023.

Federal Reserve Chair Jerome Powell, speaking Thursday, acknowledged the recent inflation data as “encouraging,” but emphasized that policy must remain vigilant. He cautioned that long-term interest rates may stay elevated due to persistent supply-side shocks and fiscal imbalances. Powell reiterated the Fed’s data-dependent stance, signaling no imminent rate cuts while inflation remains above target.

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