March’s Inflation Data Likely to Indicate Ongoing Deceleration

Last month’s price increases are anticipated to have further subsided, according to an inflation measure closely monitored by the government.

According to Bloomberg estimates, March’s Consumer Price Index (CPI) is anticipated to be 5.2%, reflecting a deceleration from the 6% annual gain observed in February.

The CPI is scheduled to be released on Wednesday.

While the expected annual increase of 5.2% in consumer prices for March would represent the slowest increase since May 2021, it still remains well above the Federal Reserve’s target of 2%.

The Fed has been increasing interest rates to combat inflation, but they run the risk of pushing the economy into a recession if they raise rates too rapidly.

It is expected that consumer prices will have gone up by 0.2% in March when compared to the previous month. This shows a decline from the 0.4% increase observed in February.

According to Bloomberg data, March’s prices are expected to have increased by 0.4% compared to the previous month and 5.6% compared to the previous year on a “core” basis.

This measurement excludes the more volatile costs of food and gas.

The following are the expected changes in comparison to the previous month’s readings:

  • CPI YoY: +5.2% expected versus +6% in February
  • CPI MoM: +0.2% expected versus +0.4% in February
  • CPI “core” YoY: +5.6% expected versus +5.5% in February
  • CPI “core” MoM: +0.4% expected versus +0.5% in February

The latest jobs report, which demonstrated a decrease in hiring last month, will be followed by Wednesday’s data, which is a crucial factor in determining the Federal Reserve’s monetary policy.

The Bureau of Labor Statistics reported on Friday that the U.S. economy added 236,000 jobs in March, causing the unemployment rate to decrease to 3.5%.

However, despite the slowdown, it is unlikely to be sufficient for the Federal Reserve to halt its aggressive campaign of raising interest rates.

According to data from the CME Group, there is a 70% chance that the Federal Reserve will increase rates by an additional 0.25% in May, as of Monday afternoon’s market pricing.

Central bank’s forecasts released last month predicted that there would likely be one more 0.25% rate increase this year.

“Our base case is also for a 25 [basis point] hike in June, although there is a good deal of data to be seen before then, beginning with…CPI and retail sales releases,” John Canavan, lead U.S. analyst at Oxford Economics, wrote in a note last week

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