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Wednesday’s much-anticipated U.S. (CPI) inflation report for March got here in hotter than anticipated, offering additional proof that the Federal Reserve shall be in no rush to start out reducing rates of interest anytime quickly.
Supply: Investing.com
The rose 0.4% final month, matching the most important month-to-month enhance since September. Within the 12 months via March, the annual elevated 3.5%, above forecasts for 3.4%. That adopted a achieve of three.2% in February.
Excluding the risky meals and vitality elements, climbed 0.4% over the prior month and over final yr. The forecast had been for 0.3% and three.7%, respectively.
Whereas headline CPI has come down considerably from a 40-year excessive of 9.1%, the info confirmed that the decline in inflation that started in the summertime of 2022 has all however stalled.
Taking a better take a look at the chart under reveals that the annual CPI charge has been caught in a variety between 3.0% and three.8% for the previous 9 months, highlighting the problem confronted by the Fed within the ‘final mile’ of its struggle towards inflation.
Supply: Investing.com
The ‘final mile’, which is commonly the toughest to convey underneath management, refers back to the last 1% or 2% of extra inflation that the Fed wants to beat to satisfy its 2% goal.
Key Takeaway
The Fed’s inflation battle is much from over.
U.S. CPI inflation remains to be rising much more shortly than what the Fed would contemplate according to its 2% goal vary.
Moreover, core inflation is proving stickier than anticipated and is anticipated to stay properly above the Fed’s goal for the foreseeable future.
Supply: Investing.com
Moreover, there’s a rising threat that inflation may even go larger from right here contemplating the current spike in commodity costs.
Taking that into consideration, the U.S. central financial institution shall be in no rush to decrease its key Fed funds charge after one other sizzling inflation report.
As such, I’m sticking to my view that the Fed won’t be reducing rates of interest this yr, with the primary transfer now more likely to solely occur in Q1 2025.
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Disclosure: On the time of writing, I’m lengthy on the S&P 500, and the through the SPDR S&P 500 ETF (SPY), and the Invesco QQQ Belief ETF (QQQ). I’m additionally lengthy on the Expertise Choose Sector SPDR ETF (NYSE:).
I frequently rebalance my portfolio of particular person shares and ETFs based mostly on ongoing threat evaluation of each the macroeconomic surroundings and firms’ financials.
The views mentioned on this article are solely the opinion of the writer and shouldn’t be taken as funding recommendation.
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