AI Legalese Decoder: A Valuable Tool for Navigating Inflation Concerns and Rate Cut Debates
- April 10, 2024
- Posted by: legaleseblogger
- Category: Related News
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Investors Awaiting March CPI Data Release from Federal Reserve
On Wednesday, investors eagerly await one of the crucial data points that will influence the Federal Reserve’s upcoming interest rate decision: March’s Consumer Price Index (CPI).
According to estimates from Bloomberg, the inflation report, scheduled for release at 8:30 a.m. ET, is projected to reveal a headline inflation rate of 3.4%, an increase from February’s 3.2% annual price hike. The surge is anticipated to be driven by higher energy expenses, particularly due to a spike in gas prices.
Month-over-month, consumer prices are expected to have increased by 0.3%, slightly lower than February’s 0.4% rise.
Regarding core inflation, which excludes the more volatile food and gas costs, prices in March are expected to have risen by 3.7% year-over-year, showing a slight deceleration from the 3.8% annual rise in February.
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Anticipated Changes in Core Prices
Bank of America economists Stephen Juneau and Michael Gapen predict a cooling off in core CPI inflation for March after two solid reports at the beginning of the year.
Core prices are projected to have increased by 0.3% monthly in March, compared to the 0.4% rise in the previous month.
The persistence of elevated core inflation levels is attributed to higher shelter costs and core services expenses like insurance and medical care.
However, Bank of America foresees a marginal decrease in core goods prices, particularly driven by a decline in new and used car prices. Additionally, the bank expects reduced pricing pressure from core services such as airfare and lodging away from home.
If their forecast holds true, it is expected to instill confidence in the Federal Reserve, as stated by the economists.
Additional economists also foresee further improvements in core inflation as the year progresses. Goldman Sachs lead economist Jan Hatzius expects monthly core CPI inflation to slow down to 0.20-0.25% going forward, with more disinflation anticipated in 2024 from market rebalancing in the auto, housing rental, and labor domains.
Contemplating Rate Cuts
Inflation has persistently exceeded the Fed’s 2% target on an annual basis, with Fed officials describing the path to 2% as “bumpy.”
Although the core PCE price index, the Fed’s favored inflation indicator, has displayed a minor cooldown in recent months, with the year-over-year change dropping to 2.8% in February from 2.9% in January, Federal Reserve Chair Jerome Powell expressed satisfaction with the data.
Despite some supportive data, such as a robust labor report indicating more job additions than anticipated in March along with stable wage growth and a reduced unemployment rate, markets are now foreseeing only two and a half 25-basis-point cuts this year, a decrease from the initial six cuts forecasted at the beginning of the year, as per Bloomberg data.
Atlanta Fed president Raphael Bostic expects one rate cut in 2024 but does not rule out the possibility of either two cuts or no cuts, according to his conversation with Yahoo Finance. In contrast, former St. Louis Fed president James Bullard maintains that a scenario involving three rate cuts remains the “base case.”
According to Mizuho Securities USA chief economist Steven Ricchiuto, the Fed’s desire to cut rates is being hindered by the robust economy, particularly American consumers’ resilience, which he believes poses a formidable challenge.
As of Tuesday afternoon, market data from the CME Group indicates a 56% likelihood of the Federal Reserve commencing rate cuts at its June meeting, down from 62% the previous week.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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