On Tuesday morning the BLS will release the monthly CPI figures for March. It will no doubt be closely watched and any deviation from expectations could significantly move the market.
So let's start with the expectations.
Currently the consensus is for CPI to be 0.5% month-over-month and 2.5% year-over-year.
For Core CPI, the expectations are 0.2% month-over-month and 1.5% year-over-year.
Source: https://www.bloomberg.com/markets/economic-calendar
Although the Fed's preferred inflation metric is the PCE deflator, they say they do pay attention to several inflation indicators. So these are still important figures.
You also may have heard the Fed say that they expect inflation to be higher in the near term. There's good reason for this. As this report is for March 2021, the year-over-year comparison will be the first significant month of the Covid-19 pandemic, March 2020. In that month, the CPI actually fell by -0.3%. In April 2020, prices fell again by -0.7%. These figures are very unusual, as the spring months usually see price increases. So for the next two months, the year-over-year comparisons are going to be impacted greatly by the very weak spring from 2020.
This is why inflation may seem high than the Fed prefers, but there is indeed a good chance that it is temporary due to the weak year-over-year comparisons. However, the market is priced in at certain assumptions mentioned earlier. If inflation comes in hotter than 0.5% headline and 0.2% core, the market could sell off. Similarly, if it comes in less than those figures, the market could rally.
We'll know Tuesday at 8:30 AM EST. It could be interesting.
Submitted April 12, 2021 at 08:53PM by SteveAM1 https://ift.tt/3g55Wq8
