Inflation in the United States continued to rise last month, but the increase showed signs of moderation. The consumer price index (CPI) rose by 5.0% year-on-year, a full 1 percentage point less than the previous month, better than market expectations. This gives the Federal Reserve (Fed) room for policy maneuvers, as outsiders expect it to hold pat after raising interest rates in May, and the end of the rate hike cycle may be in sight.

 

U.S. stocks rebounded in response, with the Dow Jones jumping 160 points or 0.5% in early trading, the S&P 500 and the Nasdaq Composite Index rose at least 0.5%, and then the gains were curtailed, and the dollar fell.

 

The U.S. Department of Labor announced on the 12th that the annual increase in CPI in March was 5.0%, which was lower than the 5.1% annual increase in the Bloomberg News survey, and far lower than the 6% annual increase in February, which was the lowest since May 2021. Compared with the previous month, the CPI increased by 0.1% in March, which was also lower than the 0.2% increase predicted by Bloomberg's survey. Among them, egg prices fell by 11%, the largest drop since 1987, and it was the second consecutive month of decline. Food inflation also slowed down.

 

After deducting energy and food, the core CPI increased by 5.6% year-on-year, in line with market expectations, but 0.1 percentage points higher than in February, suggesting that price pressures for some goods and services remain high. Compared with the previous month, the core CPI increased by 0.4% in March, and the monthly increase was 0.1 percentage points lower than that of the previous month.

 

March CPI is one of the most important economic data ahead of the Fed meeting next month. Still high inflation, a tight labor market and a easing of the financial turmoil sparked by the collapse of two regional U.S. banks should make restoring price stability a priority for the Fed. According to CME Group's (CME) FedWatch tool, the market tends to think that the Fed will raise interest rates by 1 yard at its May meeting.

 

Roach, chief U.S. economist at LPL Financial, said: "As the economy slows, consumer prices will decelerate further, which should bring inflation closer to the Fed's long-term target of 2%. Investors are more confident that the next Fed meeting may It was the last time the committee raised the federal funds target rate, and the market is likely to react positively to the report."

 

High rents have kept core inflation high. Even though independent data show that rents are on a downward trajectory, they are not expected to cool down until the second half of the year. Housing prices are reflected in the CPI usually later than independent data. The road to "slowing inflation" is likely to be bumpy in the future, and service industry costs may replace rent as a new source of pressure.

 

Strategists at the BlackRock think tank predicted in a report released this week that inflation will indeed cool as consumption patterns normalize and energy prices fall, but they expect inflation to remain higher than the Fed's for the next few years. 2% target. (Source: money.udn0413) ☺