Economic Data Report
Inflation Proving Tough to Control
- 3.5% YOY came in higher than expected
- US inflation proving to be tougher, more persistent than anticipated
- Fed rate cuts may be fewer and later than assumed at beginning of year
- Both stock and bond markets sold off in response to inflation report
US Inflation (CPI) – Proving Tough and Persistent
The “all items” CPI index came in at 3.5% for the 12 months ending in March. The result was higher than expected and triggered selloffs in both stocks and bonds. Inflation is proving to be tougher to quell than anticipated by both Federal Reserve policymakers and market analysts. The broad index has displayed a worsening month-over-month trend since last October. The “core” index (excluding food and energy) was up 3.8%. The core index had been improving in recent months but appears stalled at this level. Energy, which helped bring down inflation last year, is now contributing to higher prices. The benefits of an improving supply chain are behind us, and inflation in the services sector is proving stubbornly resistant to higher interest rates. This report may delay the start of any interest rate cuts by the Fed until after this summer and will almost certainly cause them to take a more cautious approach to any such cuts this year.
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This information is for informational purposes only and does not constitute investment advice.
Sources:
GDP – Bureau of Economic Analysis
Employment & Inflation – Bureau of Labor Statistics
Interest Rates – Federal Reserve
P/E S&P 500 – multpl.com
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