CPI Report Analysis: Inflation soars, gas prices bite — April 10, 2026

[00:00:00] Julie Hyman: Welcome to Yahoo Finance's special coverage of the March CPI report. I'm Julie Hyman here with Miles Udland, and we are getting a number coming in largely in line with estimates 0.9%, the headline increase in consumer prices month over month, 0.9%. If you strip out volatile food and energy prices, we know that a lot of this increase came from energy. We see a 0.2% gain month over month, so that is more benign than expected by a tenth of a percent. Year-over-year CPI rising by 3.3%, and on the core basis, year-over-year up by 2.6%. So takeaway here is, yes, indeed, the Iran war driving up energy prices, driving up gasoline prices in particular, led to a hot headline number of 0.9%. If you strip that away, you actually got a little bit of a smaller-than-expected increase in that month-over-month inflation of 0.2%. So, Miles, you know, I know you got the release up, and you're looking at some of the numbers here, but I think we knew going into this that this was going to be a gasoline story and a fuel story. [00:01:05] Miles Udland: So let's just go through a couple of the particulars that the BLS calls out here right at the top of the release. Index for energy rose 10.9% in March. That's a monthly increase over the prior month, led by a 21.2% increase in the index for gasoline. That accounted for nearly three-quarters of the monthly all-items increase. So that 0.9% increase that you mentioned, Julie, on the headline number, the monthly increase, about 75% of that coming from just those two categories. So that's, I mean, we knew that was going to be the story of the report coming in, but now we just have some actual numbers around that. You know, we're going to get into how this changes or doesn't change the overall picture for inflation. But, you know, it's funny you look at, it's not funny, but, you know, you look at the tables they have in here, the charts, and it's the second major distortion now on this 12-month look back because we're missing two months of data. So I look at a 12-month graph here. I've got one month, March of 25, where it was flat, then nine months where there's an actual bar on the chart, two months where there's nothing, and one of those months with the bar is a 0.9% increase. So I think the overall inflation picture, let's just say distorted, is a word that I would use to describe. Like, we have a general sense of where it is, but there's a lot of noise over the last year between missing data and now, of course, data that's materially impacted, extremely impacted by, you know, geopolitical events. [00:02:34] Julie Hyman: Right. And, of course, you had, I mean, when you're talking about distortions, the tariffs were the big prior distortion as well. And we're just kind of lapping that, too. Right. Yeah. So, I mean, and I'm still seeing some... [00:02:42] Miles Udland: It's like that distortion feels small relative to, again, two full months of just missing data, plus now the increase we've seen from energy prices. [00:02:51] Julie Hyman: Right. So it's hard, to your point, hard to get a clear picture. So let's get some help, okay? And by the way, we've got futures little changed even after this number, you know, as we continue to watch what's going on here. So not seeing a big change there. Joining us now to break down the CPI report is Claudia Somm, New Century Advisors, Chief Economist and former Federal Reserve Board Economist, and Leslie Falconeo, UBS Global Wealth Management Head of Taxable Fixed Income Strategy. Claudia, I'm going to start with you and kind of go to the point that Miles was just making, which is that, like, this last year, it's been really hard to sort of suss out what exactly is happening with inflation. You pay a lot of attention to this. So what do we do with this latest number, given that? [00:03:31] Claudia Somm: Right. Well, I think, you know, we've got to dig into the details of it. But because, you know, as Miles pointed out, we're kind of living through a whiplash economy in terms of policy changes, geopolitical events. And you really just have to kind of look at how it's passing through the data. So a really important thing to look at in today's release is in the core goods. So set the energy aside that did what we largely expected, but look at the core goods, because we're still looking to see the end of that tariff pass through. Now, I think, you know, it's good we got a little softer core reading than we had expected. But again, it's really into the details of trying to figure out are these, you know, cost shocks passing through in a way that we can say, you know, inflation's headed back to normal. But then we get yet another shock that we have to kind of think through. So it's a really tricky time to think through these data. [00:04:23] Miles Udland: You know, Leslie, as I look at this number and I see 2.6% on the core year over year, it still feels like from a Fed perspective, and I know the market has priced out Fed cuts this year, but it really just feels like from that perspective, it remains certainly more challenging than many investors had expected three months ago to start to draw this picture in your mind of when the Fed's going to start to see inflation back in a place where they're even more comfortable than they were last year going ahead and lowering interest rates from these levels. [00:04:57] Leslie Falconeo: Yeah, I mean, listen, we still think that the Fed cuts later in the year. You know, if we look, you know, normally the Fed tends to look through these sort of supply issues, they're much more demand focused. And in our view, particularly last month, you know, the market shift from moving to, okay, they're going to cut, they're going to have this, you know, this non-recessionary health growth kind of cuts to, well, now we have a probability that they're going to hike, we thought was way overdone, and we put a very low probability on that. We do think, though, that obviously, you know, similar to most people, first we thought maybe it would be June they would cut. And now we're pushing that out a little bit, because I think Claudia mentioned, you know, there's, until we get through a lot of this whipsaw, this verbal whipsaw, we know we, this weekend is going to be probably another round. You know, we really have to see and wait for that data, but it's going to take a longer period of time. So while we're sticking with the fact that we do believe, you know, the Fed cuts, we do think growth slows in the second half of the year. We do think the consumer, while remaining healthy, will probably pull back a bit, you know, over time over the next, you know, three, six, you know, seven months. But I think the market just really got way too far ahead in terms of thinking they would hike in March. And most of that had to do with the fact there's a lot of concentrated positions coming into the end of the year, you know, rising productivity, you know, lower disinflation in the second half. And I do think that a lot of that has been cleaned out. So we should see a bit more stability now, but what we're not going to see is this, less geopolitical, verbal whipsaw, which I think the market's really focused on. [00:06:31] Julie Hyman: And Claudia, we have talked a lot about sort of how fuel prices percolate through the economy, how they do, what is the transmission? How long does it take? Could you walk us through some of your thinking on this? You know, I noticed, for example, standing out, besides the huge double-digit gains we saw in fuel, the other thing that stands out to me on the month-over-month gains is apparel, still up 1%. In terms of prices. And that's been kind of a sticky area in part because of tariffs. And then also if you're spending more in diesel to move your apparel around, for example, maybe there's more to come. So how are you thinking about this question and how long we're going to, and lagged, we're going to see these effects? [00:07:13] Claudia Somm: Right. So I think with apparel, what had actually been surprising last year was the lack of price increases. It is a fairly import-intensive good, and yet we hadn't seen a lot of increases. That changed about, you know, three or four months ago, and we've really started to see those increases. So I think with apparel being a strong reading, that's just a reminder of we can get, like, big changes. I mean, tariffs, the big changes, these are a year ago, and it can have a very long lag in terms of, you know, the, like, showing up in the data. Because, you know, industries and pricing, like, it just, there's a lot of details to that. So I still think of the apparel as kind of a tariff piece that we're finally seeing that pass through. But absolutely to your point about these, the energy cost shock, you know, it's very clear in the release, gasoline prices went up, American consumers felt that last month, but also diesel prices went up a lot. And that is, that does affect some drivers, but it also is really important for shipping costs. And, you know, those are the things that are going to be very diffuse, and that is going to show up over a period of time, right? Like, those costs aren't going to just show up all at once in terms of consumer prices. So that's where this does have a tail to it, but it absolutely is important to see some of the negotiation. Like, we want to get to the peak of the energy hit, you know, so that we don't, like, so that we can manage the severity. And then there is the issue, it's going to take a while for this to feed all the way through. [00:08:37] Miles Udland: You know, and we're getting, Leslie, all these distinct data points, and we're trying to draw the picture of where the economy is at. I'm just looking now at the U.S. Treasury curve. And I think what's remarkable to me is that yields, twos, fives, tens, they're basically where they were, a little bit higher than where they were, but mostly where they were to start the year. We've seen some fluctuations in there. I'm just curious how you are thinking through what feels to me a dynamic where, I guess I'm asking, is this something where yields might break one way or the other? Is that how you're thinking about this, or are investors making peace with a world where, you know, we're just going to see four and a quarter for, you know, an extended period of time on the 10-year? [00:09:15] Leslie Falconeo: You know, that's a great question, because you're right. If you look at since the beginning of the year, the 10-year's up maybe like 10, 12 basis points. I mean, the short end is obviously up much more, given the fact that the market's repriced that Fed policy path. But, you know, that's how we're standing right now, but if you look what happened in March, I mean, the 10-year Treasury yield got up to, you know, about a 448, and that's from, you know, the end of February, that was about a 395. And, you know, in fixed income, we always say it's not necessarily the absolute level, but how quickly you get there, that really can have an impact on things such as credit spreads. You know, we like that short end. We're buying that short end around that two to five year, particularly when they were pricing at a height, because we just felt that was, you know, very overdone and highly unlikely. So, when it comes to the 10-year, you know, look, we're not willing quite yet to move that far out the curve, even though we think by the end of the year, the 10-year Treasury yield will likely be lower as growth starts to slow, and our belief that the Fed will cut by the end of 2026. And that's simply because of a lot of volatility that you're seeing, you know, the lot of volatility that you're going to see in the back end. We don't know, like, when we look at some of these break-evens, we know that the long-term break-evens are right now anchored. But again, if this sort of conflict extends further than what we're anticipating, that could completely shift, and that 10-year can move up a bit higher. And, of course, we have the ongoing discussions over the deficit. So, we do think there's value in the Treasury, but we're sticking with that short end, because simply the risk right now to go out further, we just don't think is prudent. [00:10:43] Julie Hyman: Claudia, do you agree? Do you think the Fed's still going to cut by your end? [00:10:48] Claudia Somm: That is my base case, but I agree. They're going to wait to see the evidence, right? They're going to need to see inflation turning back down to 2% in a meaningful way. And, you know, we continue to get, you know, shocks and developments that stand in the way of that. So, I don't feel, like, firm in the conviction, but I think they're going to wait, and this is going to take some time. And, you know, the good news of it is it does appear like they have some breathing room. Labor markets, you know, they're not perfect, but there are some signs of stabilization early this year. So, there's a little less tension. I think they've got some space to wait and really see the inflation play out. [00:11:26] Miles Udland: Yeah, Claudia, I was going to ask. I know we're on inflation this morning, but to get your thoughts on the job market, the jobs report we saw a week ago today, that was a surprising number. And I guess also, you know, with 5 or 10 months now, I guess, we're seeing been on either side of job gains, job losses. Just curious how you're thinking about the volatility in that data and how the Fed maybe is balancing, you know, its two mandates right now. [00:11:49] Claudia Somm: Yeah, I think we have to understand that we are in a very low job creation economy at this point, right? With the reductions in immigration, the aging of the population, what a good job number is, is barely above zero, which means we are going to have months of going, you know, declines and increases. And that's just the reality of, like, we have a very slow-growing labor force, and that ought to feed through into slowing down growth overall, right? We just don't have a labor force. I think we're rewriting some of the kind of typical rules of thumb about how to think about the economy, what's a good print, what's a bad print, you know, that that's really – there's some really fundamental shifts happening in the labor market right now. But it's not – like, I mean, this is a policy path we're on. It's not necessarily recessionary. It's just slowing things down. [00:12:37] Julie Hyman: I'm also curious, as we are looking at policy, there seems to be some movement in when we're going to get a confirmation of Kevin Warsh. Leslie, how closely are you watching that? Any doubt in your mind that that's going to kind of go ahead on schedule when all is said and done? [00:12:54] Leslie Falconeo: No, I mean, we don't – I mean, we don't think so. But we also know – this is by a committee. We could ask that quite a bit. And we always have a debate on whether or not, you know, he's considered a dove or a hawk overall. But I think the market's really not as focused on that as it was. I mean, obviously, we still have to see some of the results of the Lisa Cook case, you know, in a couple months. But I think that that is – that might come to the forefront once again. But, you know, it's something that we're watching. But, again, we do feel this is more of a type of, you know, committee-type vote. And we don't anticipate that he's going to make drastic changes in day one. This is going to take a long period of time. But – so we're watching it. But it's definitely not on the headline right now. [00:13:38] Julie Hyman: Claudia, Leslie, thank you guys so much. Really appreciate it. As we, again, continue to watch these numbers and watch markets not doing a heck of a lot right now. Thanks. [00:13:47] Speaker ?: Thanks. - Thank you.