US March CPI comes in on the cool side

People pump gas at a Sunoco gas station after the inflation rate hit a 40-year high in January, in Philadelphia, Pennsylvania, U.S. February 19, 2022. REUTERS/Hannah Beier

NEW YORK, April 12 (Reuters) – U.S. consumer prices barely rose in March as the cost of gasoline declined, but stubbornly high rents kept underlying inflation pressures simmering, likely ensuring that the Federal Reserve will raise interest rates again next month.

The Consumer Price Index climbed 0.1% after advancing 0.4% in February, the Labor Department said on Wednesday. Year to date, the CPI increased 5.0%, the smallest 12-month gain since May 2021. The CPI rose 6.0% on a year-on-year basis in February. read more

MARKET REACTION:

STOCKS: U.S. stock index futures extended gains and were last up 0.77%, pointing to a strong open on Wall Street BONDS: U.S. Treasury yields fell, with 2-year note last at 3.912, and the 10-year note down at 3.3625% FOREX: The euro extended a gain against the U.S. dollar, last up 0.57%, while the dollar index was off 0.6%

COMMENTS:

PETER ANDERSEN, FOUNDER, ANDERSEN CAPITAL MANAGEMENT, BOSTON. “It is very positive, I think we are finally starting to see the cumulative effects of the relentless rate hikes that we have all suffered through for over a year now.” “The Fed is certainly not on autopilot when it comes to future hikes and I believe as a result of data like this, the Fed’s next meeting is anything but certain as to whether or not they will raise rates.”

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, CHARLOTTE, NORTH CAROLINA

“You have to consider what was going on prior to the number. Big picture there were just a lot of concerns about recession, about inflation continuing to remain hot, almost a stagflationary type of environment which is maybe the worst-case scenario for financial markets. More recently, we have kind of softened the recession piece with payrolls coming in at somewhat solid levels and now we are somewhat solving for the inflation remaining sticky while the economy slows piece of it, the stagflationary piece of it, by showing that although it is not exactly back to the Fed’s target it is slowly starting to edge lower. It seems like the way things are headed is for probably a more pronounced economic slowdown into the back half of the year, but it seems more and more as if that will also come with inflation also slowing down somewhat quickly in the back half of the year.

“Even now, you have to take these numbers with a little bit of a grain of salt from the standpoint of at least the core will start to feel some of the impact of energy prices kind of ticking back up and that can be something that kicks off a new round of increases that feed into the core because energy is an input costs into so many various businesses and services that we have to watch that a little bit carefully given what is going on there with OPEC recently cutting supply. All of this to say that inflation remains at levels that are probably higher than what the Fed feels comfortable with and for now, probably makes another rate hike the base case unless some new financial risk clears up.”

BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN “May is a maybe, not a definitely. Wages aren’t reaccelerating. Supercore is contained. We’ll likely see weakness in retail sales and industrial production this Friday, which can further tilt the Fed towards a pause.”

RANDY FREDERICK, MANAGING DIRECTOR OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS

“Most of these numbers either came in on target or slightly better. The markets are looking at the combined reports as a net positive overall.”

“The data was a little bit better than what was expected, so that tells me that the bond market is saying that the probability of this next rate hike has decreased just a little bit.”

“The other number that’s important is the PPI number that comes out this week. That’s not normally one that moves markets a lot, but I think in this environment we’ll be looking for the PPI to confirm that inflation is indeed moderating.”

“The earnings season is not expected to be all that terrific. When the quarter ended, the expectations for year over year earnings was that it would be down by about 6.6%. That’s a pretty substantial fall and it would be the worst quarter that we’ve had since going all the way back to Q2 of 2020, which of course was right when we had all of the lockdowns.”

“So far no big change yet in Fed bets. That will probably change a little bit today as people digest this data, maybe even within the next half an hour or so.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The topline is good news but the core is still elevated. Inflation is going in the right direction but the fact that core remains stubbornly high suggest that the Fed is likely to raise interest rates by 25 basis points in May. It weakens the argument for a pause.”

“Futures are going up based on the topline number, that’s what markets are focusing on.”

“Inflation is cooling down. (The report) indicates that structural inflation is coming down and transitory inflation is staying high.”

Compiled by the Global Finance & Markets Breaking News team

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