Mid-Week Market Minute 4.12.23

Market Updates

Latest CPI Beats Expectations, Shows Inflation is Slowing

Stocks in the U.S. were mixed this week following the release of the Consumer Price Index (CPI) report for March. This month’s report showed inflation rising 0.1% for the month, below the expected 0.3% monthly rise. Year-over-year, prices increased 5%, down from 6% the prior month and better than the 5.2% estimate. Core prices, which exclude food and energy, showed an annualized gain of 5.6%, in line with consensus estimates.

With core inflation still well above the Federal Reserve’s long-term target of around 2%, it is likely the central bank will raise interest rates by another 0.25% (25 basis points) at the next policy meeting on May 3, which would take the funds rate to a range of 5.00% - 5.25%. While inflationary data remains elevated, Minneapolis Federal Reserve (Fed) President Neel Kashkari reaffirmed his belief that U.S. inflation will near the targeted reading of 2% in 2024. In addition to a speaking engagement by Fed officials, investors will get a look at the Federal Reserve meeting minutes from March, which are slated for release on Wednesday afternoon.

In other data, the National Federation of Independent Business (NFIB) Small Business Optimism Index moved lower in March as the banking crisis weighed on sentiment. On the housing front, mortgage applications for the week ended April 7 jumped 5.3% as interest rates continued to fall. Overseas, inflation remains elevated but is showing signs of slowing. In Japan, Producer Prices rose 7.2% year over year, below last month’s reading of 8.2%. Meanwhile, India’s CPI inflation is expected to ease from 6.44% to 5.8% on an annual basis.

Source: GSAM, CNBC, JPMorgan

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