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Opinion
Jonathan Levin

Market Is Still in the Denial Stage About Inflation

The latest consumer price index confirmed that rising prices have spread from goods to services and indicates a long journey back to stability.

Air fares have replaced used-car prices as the excuse of the month, but they can't hide the bigger inflation picture.

Air fares have replaced used-car prices as the excuse of the month, but they can't hide the bigger inflation picture.

Photographer: Frederic J. Brown/AFP/Getty Images

The latest US inflation report should be a reality check for Wall Street, but many investors are still wearing rose-colored glasses. Bond yields ticked slightly higher Wednesday after the Labor Department reported that consumer prices rose more than forecast last month, but they are still nowhere near reflecting the monetary policy path it may take to rein in inflation.

It’s easy to focus on the superficially positive parts of the report, yet the outlook is far more complex. The 8.3% increase in the consumer price index in April marked a slight slowdown from March, bolstering the view that the worst inflation in 40 years has peaked and is beginning its descent. But the figures confirmed that inflation is spreading from goods to service-related prices and indicate a long journey back to what the Federal Reserve may regard as stable prices.