- Both headline and core CPI increased 0.2% in March, the fastest monthly pace in 2014
- Food prices outpaced growth in other components, partially due to the drought
- Sluggish inflation unlikely to sway Fed policy through the end of the year
The headline consumer price index increased 0.2% in March, slightly accelerating after posting back-to-back months of 0.1% growth. On a positive note, YoY headline inflation growth bumped up to 1.5% after falling to a hazardous 1.1% low in February which supported concerns about depressed inflation and potential deflation. The acceleration was once again led by a spike in food prices, which jumped 0.4% for the second consecutive month. The Department of Agriculture expects food prices to increase 2.5-3.5% this year barring any severe weather, and cites the ongoing drought in California as a reason for the spike in costs. With regards to the economy, if food prices outpace personal income growth this year, consumers may be forced to spend a larger portion of their budget on groceries and have less money to spend elsewhere, which could weaken demand in other areas and dampen overall consumer spending. Energy services spiked 2.6% MoM behind a 7.5% jump in utility gas services; however, a 2.0% decline in energy commodity prices offset the increase, and the energy component finished down 0.1%. Most other components of the report were insignificantly changed and trended as expected.
On a yearly basis, core inflation ticked up to 1.7% YoY, still significantly below the 2.5% Fed target for the CPI figure. Though the Fed tends to focus on the PCE index, the bump in CPI will likely ease concerns about falling inflation. We do not believe there will be an adjustment in monetary policy and expect the Fed to gradually taper through the end of this year. Overall, inflation is unlikely to accelerate significantly in the coming months, and we maintain our forecast for low and stable inflation in 2014.
General Risk Warning for stocks, cryptocurrencies, ETP, FX & CFD Trading. Investment assets are leveraged products. Trading related to foreign exchange, commodities, financial indices, stocks, ETP, cryptocurrencies, and other underlying variables carry a high level of risk and can result in the loss of all of your investment. As such, variable investments may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall Witbrew LLC and associates have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to investment trading or (b) any direct, indirect, special, consequential or incidental damages whatsoever.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.