The Fed’s closely watched core CPI measure is expected to accelerate in March, bolstering the case for further rate rises.
The rebound across equity markets is set to be tested by evidence that US inflation remained stubbornly elevated last month, challenging bets that the Federal Reserve will loosen monetary policy this year to avert a recession.
“I expect this inflation print will change the bond market’s perception that the Fed is going to cut rates substantially at some stage in 2023, and reawaken it to the fact that inflation is far more sticky than contemplated,” said Stephen Miller, investment strategist at GSFM. Still, bond futures imply a 73 per cent probability that the Fed will lift rates by a quarter percentage point at its policy meeting next month to a range of 5 per cent to 5.25 per cent.on Friday which showed that the jobless rate dipped to 3.5 per cent in March, and the world’s largest economy added 236,000 jobs.
That message was reinforced by New York Fed president John Williams who said that policymakers still have more work to do to bring down prices, and suggested they will stay the course despite the nation’s banking woes.The prospect of looser central bank policy has buoyed shares over the past month, with the SHowever, Goldman Sachs partner John Flood warned that the SP 500 would sink at least 2 per cent if annual headline inflation came in above February’s reading of 6 per cent.
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