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Authored by Nick Giambruno via InternationalMan.com,

Hal Finney was a pioneering computer scientist, cryptographer, and prominent Cypherpunk who played a crucial role in the early development of Bitcoin.

He was one of the first supporters, contributors, and adopters of Bitcoin.

In short, Finney was a visionary who understood Bitcoin’s potential before almost everyone else.

In December 2010, Finney wrote:

“There is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins.

Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the blockchain.

There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.

I believe this will be the ultimate fate of Bitcoin, to be the ‘high-powered money’ that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers.

Bitcoin transactions by private individuals will be as rare as… well, as Bitcoin based purchases are today.”

Bitcoin banking takes the “free banking” concept and makes enormous improvements.

The free banking era in the US lasted from the 1830s to the early 1860s. Minimal regulations and the absence of a central bank characterized it.

Banks were permitted to issue their own currency, known as banknotes, that circulated as money. These banknotes were supposed to be redeemable on demand for the gold or silver reserves they represented.

The value of these banknotes fluctuated based on the perceived solvency of the issuing bank and the distance from the bank itself, as people were less willing to accept notes from distant or unknown banks.

Similarly, Bitcoin banks hold BTC as a reserve asset and issue digital eCash notes redeemable for Bitcoin (either onchain or on the Lightning Network) anytime on demand. These eCash notes are like digital versions of the gold-backed banknotes during the free banking era, but with several significant improvements.

The best way to think of Bitcoin banking is as a massive upgrade to the existing custodial banking models.

Below are a few benefits.

• Private transactions

• Fungibility between different eCash notes

• Low barrier to entry

• Minimizing trust

• Low switching costs

• Convenient and easy to use

• Redeemable at any time

• Backup and recovery of funds

First, we have to understand the basic structure of how a Bitcoin bank could work.

Bitcoin banks are likely to take the form of a federation.

This model reduces trust by distributing control over a group of people or entities. This federated group issues, verifies, transfers, and administers the digital eCash notes—but only if there is consensus among the federation members to take these actions.

The main idea of a federation is that you are reducing the amount of trust needed to run a system by distributing control.

The federation holds its Bitcoin reserves in a multisig wallet, a special type of wallet that requires multiple people’s authorization to spend the funds. Think of it as a safe that requires multiple keys to open.

There will likely be a wide variety of Bitcoin banking federations. Some will be small and focused on local communities, while others will be large and geared towards providing commercial-scale operations.

Naturally, there are risks with any system that depends on trust or third parties.

Bitcoin banks have risks, too, but the main point is that they significantly reduce these risks compared to centralized systems. Specifically, you have to trust that the members of the federation will not form a majority quorum to steal the Bitcoin held in the multisig wallet that backs customer deposits or debase their eCash notes. I’ll discuss these and other risks later.

Here’s how it works.

Someone who wants to obtain eCash notes will first download the software to interact with the federated Bitcoin bank. Then, you will send Bitcoin (onchain or Lightning) to the federated Bitcoin bank and receive eCash notes in return.

With a federated Bitcoin bank, you can also sell something and receive eCash notes in your wallet. You could also earn eCash notes from your employer as they deposit your salary into your wallet, just like they do with your traditional bank account today.

Bitcoin banking federations are meant to be interoperable with the Lightning Network—an open, peer-to-peer network built on Bitcoin that allows for nearly instantaneous transactions and almost zero fees. You can use eCash notes anywhere that Lightning is accepted.

With Bitcoin banking federations, you can withdraw to another federation or your own Bitcoin wallet (onchain or Lightning) anytime on demand.

Unlike self-custody wallets, Bitcoin banking federations can help users recover their funds if they lose access to their wallets.

Suppose you want to spend your eCash with a merchant with a different Bitcoin banking federation. This is where the Lightning Gateways come in. They are market makers who provide liquidity between Bitcoin (onchain and Lightning) and various eCash notes issued by different banking federations for a small fee.

When you send an eCash payment to a merchant at a different banking federation, you will send the eCash to a Lightning Gateway, which will then send the correct eCash to the merchant. Or suppose the Lightning Gateway doesn’t have liquidity in the merchant’s eCash notes. In that case, it will find another Lightning Gateway that does, send that Lightning Gateway a Lightning payment, and then the second Lightning Gateway will forward the payment to the merchant in its eCash note.

In short, Lightning Gateways will provide liquidity that increases the fungibility between numerous eCash notes issued by different Bitcoin banking federations.

It’s like seamlessly sending a payment from PayPal to a user on Cash App, Venmo, or another platform.

If this seems complicated, don’t worry. This just explains how a Bitcoin banking application on your phone would work under the hood. It does all of this in the background without your input. For the user, it will be a seamless experience of simply scanning a QR code and authorizing a payment on a phone application.

Most internet users do not know how TCP/IP or SSL works, but they use it daily in the background as they browse the web. I expect a similar dynamic with Bitcoin, the Lightning Network, federated Bitcoin banks, and various Bitcoin-backed eCash notes.

The graphic below does an excellent job illustrating how transactions with different eCash notes from different federated Bitcoin banks would work. It’s from Eric Yakes, author of The 7th Property: Bitcoin and the Monetary Revolution, which I consider the best resource for understanding the mind-bending potential of Bitcoin banking.

Source: Eric Yakes

Bitcoin Banking and Privacy

Financial privacy is one of the biggest benefits federated Bitcoin banks will offer over traditional custodians.

Chaumian eCash is what will enable it.

The name is a nod to cryptographer and Cypherpunk David Chaum, who created a way to provide secure and anonymous online transactions, much like using cash in the physical world.

With Chaumian eCash, users can spend money online without revealing their identity or transaction details to anyone, including the recipient or the federated Bitcoin banks and Lightning Gateways involved in the transaction.

One of the key features of Chaumian eCash is its use of blind signatures, a cryptographic technique that allows a federated Bitcoin bank to sign and validate eCash notes without actually seeing the transaction details.

In other words, a federated Bitcoin bank knows a valid eCash note has been issued and spent, but it doesn’t know who spent it or on what. Further, they will not be able to know individual account balances nor the identity of those who redeem an eCash note for Bitcoin.

Those running a federated Bitcoin bank will only be able to know the total amount of BTC held in reserves in the federation’s multisig wallet and the total amount of eCash notes outstanding for redemption.

This is a revolutionary improvement in financial privacy over existing custodial solutions, which offer no privacy whatsoever.

The strong privacy protections that Chaumian eCash offers enable another critical benefit: censorship resistance.

With PayPal, Venmo, traditional bank accounts, and other traditional custodial financial services, they can block a payment or cancel your account whenever they want under any pretext they find convenient.

With federated Bitcoin banks, they are unable to censor or block transactions. Thanks to the strong privacy protections from Chaumian eCash, they can’t know the details of each transaction, so they can’t block or prevent them.

In short, with federated Bitcoin banks and Chaumian eCash, we have, for the first time, a convenient custodial solution that is resistant to censorship.

Fedimint

Perhaps the most promising implementation of federated Bitcoin banks is Fedimint.

Fedimint is an open-source protocol that allows anyone to create a federated Bitcoin bank with a few clicks.

Using Fedimint to set up a federated Bitcoin bank costs nothing. No licenses or permission is needed.

In short, Fedimint could do to the banking cartels what Uber did to the taxi cartels.

Rug Pull Risk

Like all Layer 2 solutions, federated Bitcoin banks are a trade-off. They are less secure than self-custody but offer more convenience, ease of use, and privacy, among other benefits.

Specifically, you have to trust that the members of the federation will not collude to form a majority quorum to steal the Bitcoin held in the multisig wallet that backs customer deposits.

The size of that quorum will vary between different federations. The larger the quorum, the more distributed the risk.

It could be as small as a 2-of-3 setup, meaning there are three authorized users, and two are needed to spend the Bitcoin reserves in the federation’s multisig wallet, or as large as a 99-of-100 and anything in between.

Rug pull risk will naturally vary between different banking federations.

Local Bitcoin banking federations could mitigate this risk because known community members would operate them. They would likely suffer serious legal, reputational, and physical consequences for stealing their neighbors’ money.

With larger commercial Bitcoin banking federations, depositors could mitigate this risk with private insurance, rating agencies, and other market solutions.

In any case, ongoing due diligence of federated Bitcoin banks will be important. Depositors will have to do this or find someone to do it.

Centralization Risk

Trusted third parties are centralized vulnerabilities. Governments can capture and coerce them.

This is precisely how governments used the gold standard to bootstrap the fiat currency system into existence.

First, people used physical gold as money. Then, to scale, they necessarily turned to third parties, like banks, that stored gold and issued gold IOUs to facilitate trade. Governments captured those third parties and then gradually removed the gold backing from the IOUs until they were nothing more than confetti. In short, that is how the fiat currency system was born.

Could something similar occur with Bitcoin?

Bitcoin has a great chance of avoiding this fate because of its extreme portability and decentralization.

In the past, government agents could simply show up at a bank and demand they hand over their physical gold reserves to a centralized depository.

Let’s presume government agents would even be able to identify someone running a federated Bitcoin bank.

What could they do?

If the federated Bitcoin bank had been set up with sufficient geographical and political diversification, there’s not much they could have done. They could, at most, detain the one person in their jurisdiction running the federated Bitcoin bank.

Let’s say there was a quorum of 7-of-10, and the other nine federation members were located in different political jurisdictions. The Bitcoin reserves would be safe because the one person the government agents detained could not reach a quorum to spend them. The other nine federation members could then take further defensive measures to ensure the safety of the federation’s BTC.

In short, it would be exponentially more challenging for governments to capture, coerce, and centralize federated Bitcoin banks than it was for them to do the same with banks under the gold standard.

Hal Finney noted that there will likely be a market for the various eCash notes, and their values will fluctuate depending on how the market evaluates their risk. I expect eCash notes with more exposure to riskier jurisdictions to trade a discount to their Bitcoin reserves to reflect this risk.

Remember, with the open-source Fedimint protocol, anyone can easily form a federated Bitcoin bank. This low barrier to entry also helps mitigate the centralization risk.

With the traditional banking system—and banking under the gold standard—the government needs to control a relatively small number of banks and entities. With federated Bitcoin banks, anyone could potentially operate one—permission from a centralized banking cartel is not required.

Here’s the bottom line.

If governments attempted to capture, centralize, and coerce federated Bitcoin banks, I believe it would be a fruitless game of whack-a-mole.

Debasement Risk

There is also a risk that the people running a federated Bitcoin bank could secretly collude to debase their eCash notes.

Consider the example of the bankrupt exchange FTX, which created many more claims to Bitcoin than the actual BTC held in reserve. FTX account holders who thought they owned Bitcoin and did not withdraw were left holding the bag.

I think several factors will mitigate this risk with federated Bitcoin banks.

First, the cost of switching to another federated Bitcoin bank or withdrawing is low and can occur anytime. The ease at which a potential bank run could occur should put fear in the hearts of those attempting any debasement scheme.

I expect other market-based incentives, such as memberships in exclusive clubs for Bitcoin banks with the best reputations and other reputation systems, will help minimize the debasement risk.

The low barrier to entry to creating a federated Bitcoin bank and low switching costs means there will likely be cut-throat competition. If the market suspects a Bitcoin bank is debasing its eCash notes, it will be an excellent opportunity for a competitor to grab market share.

Likewise, speculators could play an important role. They will be there to short the eCash notes of Bitcoin banks suspected of engaging in debasement.

Conclusion

Bitcoin is a revolutionary innovation for the base monetary layer and provides a foundation for a new financial system.

Consider the implications of the trustless Bitcoin base layer in combination with the Lightning Network, federated Bitcoin banks issuing Chaumian eCash, and other trust-minimized Layer 2 solutions for scaling and convenience.

The amount of value they could unlock is astonishing. It could usher in a new era of free banking worldwide.

While the Bitcoin megatrend is no longer in its infancy, it is still early, and you are not too late. Bitcoin has a long way to go before it emerges as the world’s dominant money and displaces the traditional financial system.

I have little doubt The Bitcoin Supremacy will be one of the biggest financial trends of the decade. I believe that patient investors will reap substantial gains.

That’s why I’ve just released an urgent PDF report revealing three crucial Bitcoin techniques to ensure you avoid the most common—sometimes fatal—mistakes.

Check it out as soon as possible because it could soon be too late to take action. Click here to get it now.

Rice is a staple food for over 3.5 billion people worldwide, especially in Asia, Latin America, and Africa. It's grown in over 100 countries, with 90% of the world's rice produced in Asia. We have been tracking the prices of Thai white rice, which surged to 15-year highs in 2023 and has since consolidated at these highs with risks of a further upside breakout. 

According to new data from the Thai Rice Exporters Association, Thai white rice 5% broken, an Asian benchmark, rose nearly 6% to $649 a ton, inching closer and closer to last year's highs. Since early 2022, prices have surged 64%. 

We continue to follow Thai rice prices because rice is a critical staple food for billions of people worldwide. 

Here are some of the risks we've pointed out in the last few years:

• Sept. 2022: The Stage Is Being Set For A Massive Global Rice Shortage

• May 2023: Global Rice Shortage Looms, Set To Be The Biggest In Decades

• May 2023: Thai Rice Crop In Crosshairs Of El Nino As Farmers Are Warned About Water Shortages

• July 2023: "So It Begins ": US Supermarkets Hit With Buying Panic As India Bans Rice Exports

• August 2023: Rice Crisis Sends Prices To Highest Levels Since 2008

• September 2023: "Go Easy On The Curry": HSBC Warns Rice Crisis Reminiscent Of '2008 Asian Food Price Scare'

• November 2023: Rice Nears 15-Year High As Global Food Crisis 'Much Worse Than 2008'

The good news is that global food prices measured via the UN's Food and Agriculture Organization print below the 2010 Arab Spring level, an area of risk where high food prices cause social instabilities in third-world countries. However, some of the latest prints show that food inflation could increase. 

If prices do surge from here, let's remind readers of this 2008 headline from The Guardian:

Food inflation is certainly not going away. That's evident in the prices of cocoa, OJ, coffee, beef, and many other items at the supermarket. 

By Charles Kennedy of OilPrice.com

Venezuela has moved “substantial quantities of [military] personnel and equipment to the border with Guyana amid its territorial dispute over the Essequibo region.

The update comes from the Center for Strategic and International Studies in Washington D.C., which this week released a report on the latest developments in the Venezuela-Guyana dispute.

The think tank talks about an expansion of a military base on Anacoco Island in the area, with new roads and a bridge getting built in the past few months. A local airport is also being expanded, CSIS also said, citing satellite imagery and social media posts.

According to the report’s authors, the activity could be preparation for a “manufactured crisis” before or after Venezuela’s next elections, set to take place in late July.

The Essequibo region encompasses about two-thirds of Guyana’s territory and is where most of its oil resources lie, and the site of massive discoveries and new production by Exxon and partners.

The International Court of Justice previously ruled that Essequibo is part of Guyana, although this is still not recognized by Venezuela. A written agreement was penned in December between the two that denounced the use of force, instead calling for a commission to address the disputes.

However, after a December referendum, in which Venezuelans overwhelmingly voted that Essequibo is part of their country, the government pushed with its annexation attempt. The buildup of troops began in February this year and prompted expectations of an imminent military conflict.

At the time, Caracas said it had the right to shore up its borders in response to U.S. military exercises in Guyana toward the end of the year and the presence of a UK anti-narcotics vessel that is in Guyanese waters. The Venezuelan government has also criticized Exxon for depending on the U.S. military for its security and for its exploitation of Guyana’s oil resources.

Authored by Jonathan Turley,

Below is a slightly expanded version of my column in the New York Post on the first day of cross examination for Michael Cohen. He still has one day of cross examination ahead of him on Thursday. With the government resting after Cohen’s cross examination, I believe that an honest judge would have no alternative but to grant a motion for a directed verdict and end the case before it goes to the jury. Judge Juan Merchan will now have to give the full measure of his commitment to the rule of law. Given the failure to support the elements of any crime or even to establish the falsity of recording payments as legal expenses, this trial seemed to stumble through the motions of a trial. Michael Cohen was only the final proof of a raw political exercise. For critics, some of Cohen’s answers appear clearly false or misleading. Like their star witness, the prosecutors have shown that they simply do not take the law very seriously when there is an advantage to be taken. Cohen has truly found a home with the office of Manhattan District Attorney Alvin Bragg.

Here is the column:

On Tuesday, the prosecution surprised many by suddenly announcing that it would rest its case against former president Donald Trump with the completion of testimony by Michael Cohen.

It was surprising because the prosecution never clearly stated the crime that it was proving, the elements of that crime, or even why denoting payments related to Stormy Daniels were not properly recorded as legal expenses.

Indeed, the only thing the prosecutors proved was that, in the pantheon of dishonesty, there are liars, pathological liars . . . and Michael Cohen.

Cohen spent the last two days insisting that he used to be a liar but lied to help former President Donald Trump. If that is the thrust of his testimony, it is just the latest lie told by Cohen under oath.

Cohen has lied to Congress, courts, special counsels, the IRS, the banks, and virtually every creature that walks or crawls on the face of the Earth.

Notably, his past conviction for business and tax fraud were not taken in the interests of Trump but himself.

When he admitted on the stand that he lied during his prior plea agreement, that was not to assist Trump who he had already denounced. It was to advance his own interests.

There is every indication that Cohen is still lying.

Cohen repeatedly said that he could not remember even recent calls after recounting calls from eight years ago with crystal clarity. He said that he could not remember if he leaked information in the case to CNN. However, these paled in comparison to other glaring moments.

Take, for example, his testimony on his unethical decision to secretly record a Sept. 6, 2016 telephone call with Trump.

It was a breathtaking betrayal that most lawyers would not contemplate, let alone carry out.

When asked by the prosecutors about that act, Cohen bizarrely claimed that he did so to guarantee that David Pecker, the former publisher of the National Enquirer, would “remain loyal to Mr. Trump.”

No one seriously believes that this is true. It does not even make sense. Pecker was speaking to Trump about the payments and even met with him at the White House.

Playing for him a call with Trump would produce nothing but confusion rather than pressure for Pecker.

Moreover, why would Cohen tape the call without letting Trump know? The obvious motive was to squirrel away material to use against Trump if he ever needed a little leverage.

Again, it was for Cohen.

Cohen’s testimony showed that he has consistently acted in his sole interest.

After portraying his sudden cooperation with prosecutors as a type of Road to Damascus, jurors learned that all roads lead back to Cohen and his bank accounts.

After telling the jury that he has dedicated his life to righting the wrongs of Trump and holding him accountable, he admitted that he repeatedly acted to undermine the prosecution in order to make a buck.

Told by prosecutors to stop doing public interviews, Cohen did not care. He did roughly two dozen television appearances and recorded hundreds of podcast episodes.

He admitted that Trump is mentioned in virtually every episode, of which he did roughly four a week.

He recounted how he raked in millions on books, including one titled “Revenge.” He admitted that he is selling items like a $32 shirt with a photo of Trump in a jumpsuit behind bars and a coffee mug with the phrase “send him to the big house, not the White House.”

He is also peddling a reality show called “The Fixer,” in which he promises viewers, “I am your fixer.”

After just a few hours of cross examination, it was clear that Cohen is the same grifter saving himself — one Venmo at a time.

Yet, Cohen continued to reframe reality in his own self-constructed image.

When asked about his TikTok antics, he portrayed his postings as a type of sleep deprivation therapy, explaining that “having a difficult time sleeping and [he] found an out.”

No sane prosecutor would rely on Cohen, let alone make him the entirety of their case.

The prosecutors did not even bother to show that Trump was responsible for or knew about how the payments were recorded on ledgers and business records.

They also just shrugged away the need to show why denoting these payments as “legal expenses” was fraudulent — or what the correct description might be.

Those details might be demanded in any other courtroom, but this is New York and the defendant is Donald Trump.

For Bragg and his team, it is all about what they can get out of this case despite the law.

In that sense, they found a kindred spirit in their star witness, and Michael Cohen has finally found a place that values what he calls on his reality show promo his “particular set of skills.”

Oil prices are tumbling this morning despite lower CPI (juicing rate cut hopes), weak retail sales (but strong gas station spending), and a big draw reported overnight by API. It seems the main downside driver was IEA lowering its 2024 demand forecast.

• World oil demand is forecast to grow by 1.1 million barrels per day this year, down 140,000 bpd from last month's projection.

• Global crude inventories surged in March by 34.6 million barrels as trade disruptions pushed oil on water to a post pandemic high, according to the IEA.

The question is - will the official data confirm API's big crude draw and re-energize prices.

API

• Crude -3.1mm (-1.1mm exp)

• Cushing -601k

• Gasoline -1.27mm (unch exp)

• Distillates +349k (+300k exp)

DOE

• Crude -2.508mm (-1.1mm exp)

• Cushing -341k

• Gasoline -235k (unch exp)

• Distillates -45k (+300k exp)

The official data shows inventory draws across the board with crude stocks down 2.5mm barrels...

Source: Bloomberg

The Biden admin continued to add to the SPR, adding 593k barrels...

Source: Bloomberg

US Crude production remains flat near record highs at 131.mm b/d...

Source: Bloomberg

WTI was trading just above $77 ahead of the official print and rallied further on the across-the-board draws...

Finally, we note that refinery utilization rates are back above 90%, the highest since January. Rates increased in all regions, with the Midwest rising for the second straight week to 90.8%, from 85.2% in the previous week, as refineries wake up from maintenance.

Volatility in "meme stocks" continued in premarket trading on Wednesday as AMC Entertainment Holdings announced a debt-for-equity exchange for $163.9 million in bonds maturing in 2026. This strategy mirrors management's approach that helped the struggling movie theater chain capitalize on retail day traders to boost liquidity in 2021. 

A regulatory filing released Wednesday morning detailed how AMC reached a deal to swap about $164 million of its 10% notes due 2026 for 23.3 million shares of newly issued stock. The new stock is valued at $7.33 per share. 

"AMC, much of whose debt trades at distressed prices, has been chipping away at its maturities through other swaps and buybacks. It exchanged around $200 million of the debt for shares last year," Bloomberg pointed out. 

Today's news sparked a rally in AMC's high-yield bonds. The company has over $2.5 billion in outstanding bonds, most of which will mature in 2026. 

News of the added supply sent shares down nearly 9% in premarket trading to the low $6 handle. 

Shares were as high as $11.48 early Tuesday in the multi-day meme stock mania, triggered by a post on X from Roaring Kitty, also known as Keith Gill, on Sunday night.

Also, on Tuesday, AMC completed a previously disclosed ATM. The deal was completed through Citigroup Global Markets, Barclays Capital, B. Riley Securities, and Goldman Sachs & Co., raising about $250 million in new capital for the struggling company. 

The old saying goes, "Strike while the iron is hot." That's precisely what AMC's management is doing: taking advantage of retail day traders by completing ATM and debt-for-equity exchanges. Somehow, this company, which should've been dead a long time ago, continues to stay alive with help from day traders.

With the CPI report came in on top of expectations on 3 of the 4 closely watched metrics, with just headline CPI coming in at 0.3%, just shy of the 0.4% expected (with the retail sales print coming in far uglier and missing across the board), there has been some debate among the usual commenting suspects whether this inflation report was enough to tip the scales to an earlier rate cut or not, although the consensus seems to suggest that the print was enough to keep September, if not the July, FOMC meeting in play for a rate cut.

Below we quote some of the most active Wall Street economists and strategists who have already manged to sneak in a bullet point or two with their kneejerk response to the CPI print.

Neil Birrell, CIO at Premier Miton Investors:

“The usual excitement over US inflation ended up being a damp squib, as it came in exactly as expected. However, retail sales were weaker than expected and the core rate is back to levels not seen for quite some time, which might well see optimists calling for rate cuts and markets rallying.”

Capital Economics

"Core CPI was even better than it looked, particularly given that we already know the PPI components that feed into the Fed’s preferred PCE deflator measure came in, on balance, weaker than expected. We estimate that core PCE increased by around 0.20%m/m. All things considered, this is consistent with the Fed cutting interest rates in September."

David Russell, Global Head of Market Strategy at TradeStation

"Shelter didn’t ease as hoped, but there was improvement in transportation and healthcare. The number wasn’t perfect, but we’re staggering toward lower inflation. Weaker data on retail sales and the Empire Index also suggest growth is slowing, which keeps rate cuts on the table. It was a trifecta of dovish news."

Nick "Nikileaks" Timiraos, WSJ resident Fed leaker:

"One good print can't offset three unfavorable ones. It may take a couple more for officials to get over the PTSD of the Q1 inflation. It reduces the risk of any shift to a neutral bias (ie, open the door to hikes)."

Florian Lepo, Lombard Odier Asset Management

“With this in-line inflation print, rates are likely to break the [4.4%] level, dragged down by real rates. With that, the dollar should fall, supporting most assets labeled in it.”

Rubeela Farooqi, chief US economist at High Frequency Economics:

“Overall, price pressures remain elevated but are moving in the right direction. We think the data support the case for a patient approach on policy decisions from the Fed going forward although the base case remains one of lower rates this year.”

Gregory Faranello, head of US rates for AmeriVet Securities:

“Fed friendly data for the most part with both the CPI and retail sales. Both indicate a tempering which is what the Fed is looking for. These numbers support Chair Powell’s notion of ‘higher for longer’ to potentially lower.”

Ira Jersey, head of rates at Bloomberg

“The relief-rally knee-jerk reaction may be more about retail sales slowing meaningfully than the close-to-expected CPI. Sales have tended to lead goods CPI by a few months. The CPI report being pretty close to consensus underlines the continuing trend of lower-volatility core CPI sectors contributing nearly 4% on a year-on-year basis, while higher-volatility ones (right now generally goods sectors) contribute nothing. So although the data was broadly in line, inflation continues to run above the Fed’s comfort level, meaning near-term rate cuts aren’t likely.”

Source: Bloomberg

After a fourth straight month of hotter than expected PPI, analysts' expectations for CPI were tightly ranged around 0.3-0.4% MoM and printed +0.3% MoM (slightly below the 0.4% expected). The YoY headline CPI fell to +3.4% as expected from +3.5% prior

Source: Bloomberg

Under the hood, Services slowed modestly MoM...

On a 3m and 6m annualized basis, Energy costs are reaccelerating most...

Source: Bloomberg

Used car and truck prices along with Gas Utility prices plunged on a MoM basis...

Core CPI rose 0.3% MoM (as expected) with YoY slowing to +3.6%, also as expected...

Source: Bloomberg

Core goods deflation continues while Core Services continue to rise...

Source: Bloomberg

Core CPI YoY was 3.6% in April, the lowest it's been in 3 years. The 1-month annualized fell to the same 3.6% as the YoY, which is why the YoY has been more reliable as a trend measure recently.

• Housing (rent and OER) contributed 17.5 bps to monthly core CPI inflation in April. While still hot (2018-19 average was 11 bps), it's the lowest monthly contribution since Dec 2021. And as we show in the chart, YoY housing in CPI is cooling.

• Virtually all of the excess core CPI inflation YoY--the part of inflation above and beyond Fed target - resulted from housing & auto insurance. Core non-housing services have heated up on a higher frequency basis but haven't weighing much (yet) on the annual print.

• Also, while not in core, but extremely important for anyone who eats food: grocery prices actually fell -0.2% MoM in April and are running 1.1% YoY according to the Biden BLS. We doubt anyone will believe this number, which was goalseeked so that wage growth would strongly outpace grocery inflation. Relative to wages, grocery prices are back down below their 2019 levels. This, too, won't be believed by anyone.

And one step deeper - the so-called SuperCore: Core CPI Services Ex-Shelter index - rose 0.5% MoM up to 5.05% YoY - the hottest since April 2023...

Source: Bloomberg

Under the hood of SuperCore CPI, Education costs rose (to pay for cleaning up all those protests?) and Transportation Services dominated on a YoY basis...

Source: Bloomberg

And while Shelter costs rose on a MoM basis, they continues to slow on a YoY basis...

Source: Bloomberg

Goods prices are deflating at the fastest pace since April 2004, while Services prices are stuck around +5.3% YoY...

Source: Bloomberg

We note that consumer prices have not fallen in a single month since President Biden's term began (July 2022 was the closest with 'unchanged'), which leaves overall prices up over 19.5% since Bidenomics was unleashed (compares with +8% during Trump's term). And prices have never been more expensive...

Source: Bloomberg

That is an average of 5.5% per annum (more than triple the 1.9% average per annum rise in price during President Trump's term).

Finally, and most notably it was a miss... but not for the reason expected...

It was a miss but not for the reason expected: OER catch down STILL to kick in; next few CPI print will be a dovish meltdown https://t.co/w1px0HrJN0

Which means the next few months CPI will be even bigger misses...

For once, BofA's analysts 'missed' as their expectations for a small beat in retail sales was eviscerated by a huge miss across the board.

Headline Retail sales were unchanged MoM (versus +0.4% exp) and last month's +0.7% MoM move was revised slightly lower to +0.6% MoM.

Source: Bloomberg

Nonstore retailers and Motor Vehicle and Parts Dealers saw the biggest MoM declines while spending at Gasoline Stations rose the most (biggest MoM rise since Aug 2023)...

Source: Bloomberg

Both headline and core retail sales slowed on a YoY basis (ex-Autos and Gas Stations actually declined 0.1% MoM)...

Source: Bloomberg

Finally, the crucial core-control group - used in GDP calculation - plunged by 0.3% MoM (vs +0.1% MoM exp) - its third big miss in the last four months...

Source: Bloomberg

Not a good start for Q2 GDP.