In this morning’s data, the headline Consumer Price Index (CPI) increased 0.4% in March, more than expected and grew 3.5% on an annual basis, three-tenths above the annualized figure from the previous month. Monthly prices for Gasoline, up 1.7%, and Transportation Services, up 1.5%, were relatively strong while monthly prices for Fuel Oil, down -1.3%, and Used Cars and Trucks, down -1.1%, were relatively weak. Prices for Shelter were up 0.4%, the same as the previous month. The core rate, which excludes prices for food and energy, also increased 0.4% in March, more than expected, and grew 3.8% on an annual basis, which is the same as the annualized figure from the previous month.
Overall, stronger increases than expected in March for both the headline and core CPI measures. On an annualized basis, headline levels ticked higher compared to the previous month while core levels stayed the same. Inflation stays sticky, and annual rates remain well above the Federal Reserve’s 2% target. When you also consider the resilient labor market data from last week, the Fed is likely to remain patient with regard to interest rate decreases. How well consumers and company earnings hold up amidst this process will be key for the markets in the coming months.
In all, the 10-year US treasury yield ticks markedly higher following the report and equity futures are lower as we head into the market open.
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