Inflation remained subdued thanks to falling energy prices, with gasoline dropping by 6.3 and the overall energy index declining by 2.4. Food prices rose by 4 for the month, with eggs surging 5.9 and up 60.4 year-over-year. Shelter prices, a persistent inflation driver, increased by just 0.2 in March and increased by 4 over the past year. Furthermore, despite the cooling inflation, stock futures pointed to a sharp drop at market opening, and Treasury yields declined. Although Trump campaigned to curb inflation, progress was limited in early 2025. Donald Trump has urged the Federal Reserve to cut interest rates, but Fed officials remain cautious due to ongoing policy uncertainty, with markets expecting a rate cut no earlier than June. The CPI came in softer than expected, which typically signals cooling inflation. Kay Haigh emphasizes that the CPI data may be backward-looking, particularly in light of recent changes in trade policy, which means that he is likely referring to new or increased tariffs. In addition, tariffs can lead to cost-push inflation, where higher import prices trickle down to consumer prices. Despite these trade policy concerns, futures markets didn’t budge much. Finally, this suggests that traders are still betting that inflation will stay contained or that the Fed will prioritize stimulus to support growth.
3 comments:
March's 2.4% CPI print was pulled down by a sharp drop in energy prices while food remained hot and core services moved slightly lower. The Fed may hesitate on rate cuts if tariffs push import costs higher, keeping financial conditions tight in the meantime
This is a nice bit of information. I wonder how this will pan out with surging uncertainty and unwavering interest rates?
One thing that I find funny is Trump telling the FED to stop playing politics and lower interest rates, as he continues to play politics.
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