April 11, 2023 (MLN): The U.S. consumer price index (CPI) for March 2024 rose by 3.5% YoY, as compared to the 3.2% YoY in February, and higher than the market expectations of 3.4%, the latest data issued by the U.S. Bureau of Labor Statistics showed.
On a sequential basis, US CPI rose by 0.4% MoM, the same as the previous month, and higher than market expectations of 0.3%.
Core CPI surged 3.8% YoY, the same as previous month, but above market expectations of 3.7%.
On a sequential basis, Core CPI rose 0.4% MoM for the third consecutive month, and hotter than the market expectations of 0.3%.
Metric
Actual
Estimate
CPI MoM
+0.4%
+0.3%
CPI YoY
+3.5%
+3.4%
Core CPI MoM
+0.4%
+0.3%
Core CPI YoY
+3.8%
+3.7%
Treasury yields surged following the hot CPI read, with 10 year yields rising more than 20bps to 4.593%. The 2-year yield popped to 4.95% as swaps show less rate cuts priced.
CME FedWatch Tool now shows just a 20.4% chance of interest rate cate by the US Federal Reserve in June and 41% chance in July, 2024.
S&P 500 closed 0.95% lower yesterday and are down further by 0.3% today.
Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities, said “stronger than expected CPI confirms the more cautious approach toward rate cuts for the FOMC," as reported by Bloomberg.
"It also supports our bearish view on the US Treasury market short term as we work through bumps in the pathway back toward 2%," he added.
To note, CPI in the last year, March 2023 stood at 5% YoY, showing that the Federal Reserve with its fast-paced rate hikes and balance sheet reductions has been successful in curbing inflation to some extent.
However, it still remains above the country's 2% inflation goal.
CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
