US inflation falls less than expected
📌Yesterday’s US inflation data was released, and although it has slowed, it has fallen less than the market expected. The year-on-year CPI came in at 6.4% (the previous CPI was 6.5%), when the market was expecting CPI to be around 6.2%. In addition, core inflation has also only fallen by one tenth to 5.6%.
📌One of the main reasons for this disappointing data has been the shelter which contributed to the monthly increase in virtually all items. In addition, food, energy, and gasoline prices also contributed negatively to the CPI data.
📌The CPI data confirms Powell’s statements, who had been warning that they still had a lot of work ahead of them to bring the U.S. CPI to the Fed’s target levels. Despite this, the market is still ruling out a hike above 25bps at the next Fed meeting.
📌What the market is not so sure about is that the Fed, after releasing the CPI and US labor market data, will decide to raise interest rates above the 5% it had set a few months ago. For the time being, the market maintains expectations of hikes up to 5%, but what they seem to be ruling out is a possible pivot for this year.
Source: Financial Times