Cooling Inflation Gives Fed Room to PauseCoolingInflationGivesFedRoomtoPause

US inflation cooled in April, handing the Federal Reserve more ammunition to take a pause next month as higher rates and bank turmoil weigh on the economy. The consumer price index was up 4.9% year-over-year, compared with a 5% rise in March, continuing to pull away from the four-decade highs registered last year. Meanwhile, wholesale prices rose 2.3% in the same 12 months, down from 2.7% and the lowest level in two years. Inflation’s retreat, coupled with a string of bank failures, prompted the Fed to alter its guidance last week as it considers forgoing a rate hike at its next meeting in June. The central bank’s quarterly survey of senior loan officers reported on Monday weaker demand for loans and tighter borrowing conditions for businesses and consumers, reflecting the impact of rate hikes and concerns surrounding regional banks. Officials have warned that stress in the banking system may trigger a widening credit squeeze, and they face a difficult task in attempting to predict how much it may slow the US economy and reel in inflation.

Between economic data, fragilities in the bank sector and the looming debt-ceiling deadline, policymakers must balance a host of uncertainties affecting the economic landscape. The newest episode of The OUTThinking Investor podcast examines the outlook for financial markets as part of a wide-ranging conversation with David Rubenstein, co-founder of The Carlyle Group, and PGIM CEO David Hunt. Rubenstein discusses inflation’s impact, alternative strategies, and where investors can find attractive opportunities in the current environment, in addition to his thoughts on philanthropy.