The acceleration in U.S. core Consumer Price Index (CPI) inflation in March was in line with expectations, and likely a welcome development for Federal Reserve officials after a surprising string of soft inflation prints last year.
The minutes of the March 2018 Federal Open Market Committee (FOMC) meeting affirmed our outlook that the Fed will likely continue to gradually and methodically increase interest rates and that the bar is relatively high for policymakers to change the current plan for two or three more hikes in 2018.
Consistent with our view last month that the Trump administration’s more significant (and market-moving) trade actions had yet to come, the recent announcement of tariffs on Chinese products related to the Section 301 intellectual property investigation has roiled markets and increased uncertainty over the possibility of a trade war.
The U.S. Federal Reserve’s announcement of another 25 basis point hike in the fed funds rate range to 1.5% to 1.75% was widely expected by us and by markets. The more interesting aspect of the March FOMC (Federal Open Market Committee) meeting is the change to central bank officials’ forecasts.
We believe the trade actions with the most significant potential economic and market impact have yet to unfold.
We saw little to surprise in February’s U.S. Consumer Price Index (CPI) inflation print: Core CPI (excluding food and energy prices) gained 0.18% month-over-month, a moderation from January’s 0.34% gain, and held steady at 1.8% year-over-year.
U.S. inflation continued to accelerate in January, with a 0.349% month-over-month advance in core Consumer Price Index (CPI) inflation (which excludes food and energy prices) – the strongest gain since 2001.
The U.S. economic numbers released last week preceded a slide in equities, prompting keen interest in what the data may have been signaling to markets.
Core U.S. Consumer Price Index (CPI) inflation rose 0.22% month-over-month in October, broadly in line with expectations for firming price trends but notably stronger than the 0.14% average monthly pace this year.
Despite a hurricane-related surge in headline inflation, core inflation continued to run softer than expected in September, a trend that could make the Federal Reserve more cautious about hiking interest rates in December.