Newsquawk Primer: US CPI due Wednesday April 10th at 13:30BST/08:30EDT

Analysis details (11:38)

EXPECTATIONS: US headline CPI is seen rising +0.3% M/M in March (prev. 0.4%), and the annual rate is seen rising to 3.4% Y/Y (prev. 3.2%). Core CPI is expected to rise by +0.3% M/M in March (prev. +0.4%), though the annual rate of core CPI is seen easing to 3.7% Y/Y (prev. 3.8%).

DRIVING THE DATA: "Headline CPI inflation probably continued to rebound in March, but we expect the details to show that the downward trend in core inflation is getting back on track," Capital Economics said. The upside in January and February CPI readings was underpinned by a rise in owners' equivalent rent and core goods prices, but CapEco thinks they were one-offs, and adds that there is not much to suggest that recent disruptions in global shipping were having any significant macro impact, so CapEco expects core goods prices to continue falling. Analysts will also be watching the sub-components; in February, the Services less rent of shelter prices rose +0.6% M/M (matching the rate seen in January).

POLICY: Currently, the market is pricing in 63bps of rate cuts this year - down significantly from the approximately 80bps that were priced a few weeks ago. Pricing has moved more hawkishly as US economic data continues to be resilient, while some Fed officials have threatened to keep rates higher for longer if progress on bringing prices to target stalls. In recent remarks, Fed Chair Powell did not show too much concern regarding the hotter-than-expected January and February inflation readings, arguing that seasonal factors may have been at play, though the data still did not provide the Committee with any incremental confidence that inflation was falling sustainably back towards target, and reaffirmed recent arguments that the road to inflation falling back to target would be bumpy. However, other officials have begun to question the progress on inflation; Fed's Kashkari (2026 voter) has said that if inflation continues to move sideways, he would question whether the Fed needs to cut rates at all (he sees two cuts this year, vs the three cuts that the Fed pencilled in within the March forecast update). Fed's Bostic (2024 voter) warned inflation progress was likely to be slow (he sees just one cut this year, and said the Fed should be patient). As Powell alluded, this data will help determine whether the hot January and February readings were just a bump on the road, or perhaps something more.

TRADING SCENARIOS VIA JPM:

(Note: these scenarios were laid out in a note to clients, published Monday, April 8th)

10 Apr 2024 - 11:38- EquitiesData- Source: Newsquawk

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