The U.S. headline inflation dropped for another month, meeting Wall Street expectations and reviving investor interest in equities and fixed-income securities.

A report published by the U.S Bureau of Labor Statistics (BLS) on Wednesday showed that the April Consumer Price Index (CPI) -- a measure of the cost of living around the nation -- rose 0.4% in April, or at an annual rate of 4.9%, in line with Wall Street forecasts.

That's the lowest level since April 2021 due to an easing, or even an outright reversal, of the factors that drove the cost of living higher in the previous months.

For instance, food prices rose 7.7% in April compared to 8.5% in March, while energy prices dropped by 5.1%, driven by lower gasoline prices (-12.2%) and fuel oil (-20.2%). In addition, shelter cost, which accounts for over 30% of the cost of living, eased to 8.1% from 8.2% in the previous month, while prices for used cars and trucks declined at slower pace (-6.6% vs. -11.6%).

Meanwhile, core CPI, which leaves the volatile food and energy prices out of the calculations, edged lower, down to 5.5% in April 2023 from 5.6% in March, also meeting Wall Street expectations. But unlike headline inflation, which has been dropping consistently for 11 months, core CPI remains elevated.

"The top-line inflation rate slowed down to 4.9% over the year, and 3.2% on a 3-month annualized basis, " Julia Pollak, Chief Economist, ZipRecruiter, told International Business Times. It is well below its peak of 8.9% last summer and has been falling for ten months in a row, even as the unemployment rate has fallen.

"Overall, the April inflation report is encouraging and suggests that the economy is cooling in a gradual and controlled manner, allowing prices to stabilize without sharp job losses," Pollak added. "Moreover, we expect to see further cooling in inflation in the coming months as the recent tightening of credit conditions plays out in the real economy. It is well below its peak of 8.9% last summer and has fallen for ten months, even as the unemployment rate has fallen."

The fall of inflation is changing the game for the nation's monetary policy. It brings the Federal Reserve closer to reaching its price stability goal and pauses interest rate hikes.

"Wednesday's Consumer Price Index solidifies the need for the Federal Reserve to stop raising interest rates, which the central bank should have done months ago," David Bahnsen, chief investment officer, The Bahnsen Group, a wealth management firm based in Newport Beach, Calif., with over $4 billion in assets under management, told IBT. "Inflation is coming down, and it's time for the Federal Reserve to realize this."

Traders and investors couldn't wait for that news. So instead, they raced to buy stocks and bonds, sending prices higher in the opening.

Moreover, Bahnsen notes that while Wednesday's CPI print exceeded the Fed's 2% target, the actual inflation rate is very likely at the Fed's 2% target. That's because the shelter and housing component of the CPI calculation, which rose over 8% year-over-year, is keeping the overall CPI print much higher due to the way it's calculated.

"The housing component of CPI is largely representative of rental prices, which has a lag effect as renters typically lock-in their lease for long periods,"Bahnsen added. "Real estate prices across the board have declined considerably in recent months, and it's going to take a few more months for the CPI to reflect this decline."