WASHINGTON — Headline U.S. inflation cooled to 3.0 percent year over year in April from 3.4 percent in March, the Bureau of Labor Statistics reported Wednesday, an outcome that matched the Bloomberg consensus on the year-over-year measure and registered a tenth softer than consensus on the month-over-month change. The report, released at 8:30 a.m. Eastern, set off the sharpest immediate move in interest-rate futures since the April Iran-Israel ceasefire and pulled forward market expectations for the first Federal Reserve rate cut.

Core CPI, which strips out food and energy prices, rose 0.2 percent on the month and 3.3 percent over the past 12 months, both readings a tenth below consensus. Shelter, the single largest component of core inflation, decelerated to 4.6 percent year over year from 4.9 percent in March, the third consecutive monthly slowdown in the series.

Energy prices, the driver of the spring inflation spike, fell 1.4 percent on the month, with gasoline down 3.2 percent and natural gas service down 0.9 percent. The pullback reflected the unwinding of the wartime risk premium that had pushed Brent crude above $120 a barrel during the late-March escalation in the Gulf. Brent traded near $88 on Wednesday morning, roughly $36 below its March 28 peak.

Markets responded with vigor. S&P 500 e-mini futures jumped 0.7 percent immediately after the print, the dollar weakened against most major counterparts, and the two-year Treasury yield fell to 3.66 percent from 3.78 percent before the release. Fed funds futures repriced sharply: the implied probability of a quarter-point cut at the July 29 meeting moved to 63 percent from 41 percent before the report, and the September meeting now carries 91 percent odds of a cut, according to CME FedWatch.

“This is the print the doves needed,” said John Reilly, a senior macro analyst at Citi. “Three handle on headline, sub-three-and-a-half on core, and shelter finally rolling over with conviction. The argument for waiting through the summer has gotten meaningfully harder, and you can see that in the curve.”

The interest-rate-sensitive segments of the equity market led the early advance. The KBW Regional Banking Index rose 1.6 percent in pre-market trading, the Russell 2000 small-cap futures gained 1.4 percent, and homebuilder shares advanced as 30-year mortgage benchmark indications fell roughly seven basis points. The Nasdaq-100 futures were up 0.5 percent, with growth-equity beneficiaries leading.

Federal Reserve Chair Marlene Lindgren, in a speech delivered Tuesday afternoon at the Atlanta Fed’s annual financial markets conference, had said the committee would “look through transient supply-side shocks but not transient soft-landing prints.” Several analysts noted Wednesday that the speech now read as preparing the ground for a discussion at the June 17–18 FOMC meeting about whether the cuts that had been deferred during the March oil shock could be brought back into the calendar.

A senior official at the Treasury Department, asked about the print in a hallway exchange after a separate event, said the administration viewed the result as “fully consistent with the soft-landing trajectory the President has been describing all year” but declined to characterize whether the White House had a preferred timing for the first Fed move. The President is scheduled to deliver remarks Wednesday afternoon at a National Association of Manufacturers event in Pittsburgh.

Beneath the headlines, several internal series showed continued normalization. Used-car prices fell 0.6 percent on the month, the seventh decline in eight months, after rising sharply in 2024 and 2025. Airfares dropped 1.1 percent, reflecting both the easing of jet fuel costs and a meaningful softening in business travel demand identified in the most recent Beige Book. Hospital services inflation, a sticky component the Fed has watched closely, decelerated to 3.9 percent year over year from 4.4 percent.

The two areas of stubbornness were auto insurance, which rose 0.4 percent on the month and remains 8.8 percent above year-ago levels, and rents, which despite Wednesday’s encouraging shelter print remain a meaningfully positive contributor to core CPI. A senior researcher at the Bureau of Labor Statistics, speaking on background, said the agency’s regional rent surveys continued to show pipeline disinflation, but cautioned that the data flow had several quarters of lag built in.

Wall Street strategists circulated revised year-end calls within minutes of the release. Goldman Sachs lifted its S&P 500 year-end target to 5,950 from 5,800 and brought forward its expected first-cut date to July from September. Morgan Stanley, more cautious in recent weeks, kept its target unchanged but acknowledged in a research note that “the bear case for a stagflationary outcome out of the Iran war is now meaningfully harder to defend.”

Not all market participants were ready to lean fully into the soft-landing narrative. A portfolio manager at a Boston-based fixed-income manager said the firm remained underweight duration on the view that fiscal dynamics — including the $94 billion war supplemental that cleared the Senate last week and is now awaiting House action — would limit how aggressively the Fed could ease without unsettling the long end of the curve. “We do not think the inflation problem is back, but we do not think the long Treasury problem has gone away either,” the manager said.

The Producer Price Index for April is scheduled for release Thursday morning at 8:30 a.m. Eastern, with consensus calling for a 0.2 percent monthly gain in headline PPI and 0.3 percent in the core measure. Retail sales follow Friday. The next FOMC decision is set for June 18.

Federal Reserve Bank of San Francisco President Mary Daly, scheduled to speak Wednesday evening at a Stanford economics seminar, is expected to be the first sitting committee member to address the print on the record. The Fed enters its pre-meeting blackout window on May 31.