Total inflation in the USA ended at 5.0 per cent in March, measured on an annual basis.
In advance, however, total inflation was expected to rise by 5.1 percent on an annual basis, down from 6.0 percent in February, according to estimates from Bloomberg.
It was also expected that core inflation, which excludes food and energy, would tick up to 5.6 per cent on an annual basis in March from 5.5 per cent the previous month.
Fasit was also a core inflation of 5.6 per cent, i.e. exactly as the consensus expected.
– I think the market is breathing a sigh of relief, this shows that inflationary pressure is easing, says Erica Dalstø, chief strategist at SEB.
The interest rate and futures markets responded immediately after the release of the figures:
– Interest rates are falling a lot here, says Kjetil Olsen, chief economist at Nordea Markets.
On a monthly basis, core inflation climbed 0.4 per cent from February to March, while total inflation rose 0.1 per cent. Olsen believes that the market players have primarily noticed the latter.
– It strengthens the narrative many people have that inflation will come down quickly, somewhat of its own accord, and that is probably also behind the fall in interest rates, says Olsen.
Before the figures were released, the market priced in a 75.8 percent probability of an interest rate hike in May, while it dropped to 69.2 just after the figures came out.
In futures trading, S&P500 contracts jumped 0.6 percent in a few minutes. The American stock exchanges open at 3:30 p.m.
The US central bank raised the key interest rate by 0.25 percentage points on 22 March, so today’s interest rate is in the range of 4.5 to 4.75 per cent. It is the highest since December 2007, just before the financial crisis and the interest rate cuts it brought broke out.
Before the inflation figures were released, the interest rate market priced in a one hundred percent probability of an interest rate cut in 2023, and a further 60 percent probability of another interest rate cut during the year.
At the same time, Powell maintained guidance for just one more rate hike in 2023, but stated that the process of getting inflation back down to two percent is still long and the road will be bumpy.
On Wednesday evening at 20:00, the minutes from the previous interest rate meeting will be presented. The minutes can give a clue to future interest rate developments, and they are read closely by economists and analysts.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links, which lead directly to our pages. Copying or other forms of use of all or part of the content may only take place with written permission or as permitted by law. For further terms see here.
