Investors in the U.S. stock market will be closely watching Wednesday’s inflation report as it would be one of the last key data points before the Federal Reserve’s next interest-rate move.
Employment data for March, released on Friday, indicated a resilient labor market, and was viewed as boosting the chances of another 25-basis-point rate hike next month. “The odds of a Fed rate hike have increased to 70% from around 50% before [Friday’s] jobs report,” he said, adding that unless there is a significant miss on the CPI, the Fed will boost its policy rate above 5% “because inflation remains too high.”
“This development may upset the equity market, as it has already priced in a Fed pause and rate cuts, given the recent rally since mid-March and the strong performance in the technology-heavy and interest rate-sensitive Nasdaq,” Kramer said in a Sunday note. “Markets are likely to continue pricing a high probability of rate cuts from the Fed later this year even with a strong CPI print, with cuts priced out only after a number of weeks of consistently solid activity and strong inflation data,” wrote Citi economists Veronica Clark and Andrew Hollenhorst, in a Monday note.
What's traditionally the slowest quarter in spending? Oh yeh, the March quarter! Central Banks globally are using this quarters figures to by time but trust me when I say, inflation may not go up in a straight line but it's definitely going up... a LONG way up!
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