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Investors’ eyes are eagerly fixed on the March inflation data set to be released by the Bureau of Labor Statistics on Wednesday.
According to the consensus among economists, the annual Consumer Price Index (CPI) inflation rate for March is expected to rise to 3.4%, up from the previous 3.2%, while core inflation, which excludes energy and food items, is anticipated to ease slightly from 3.8% to 3.7%.
Both monthly readings are projected at 0.3%, a slight deceleration compared to the 0.4% observed in February.
Wells Fargo sits at the high end of the forecast range, predicting a headline rate of 3.5% and a core rate of 3.8%. The robustness of headline figures is attributed, in part, to the uptick in gasoline prices, with expectations of a strengthening in food inflation as well.
Analysts at Wells Fargo anticipate March’s report will reveal hints of two inflation dynamics: early-year noise and a longer journey of inflation back to the Fed’s target.
On the softer side, Bank of America expects a headline rate of 3.3% and a core rate of 3.7%. It anticipates a more subdued inflation profile in March’s report, with core inflation moderating to 0.24% month-over-month and headline inflation at 0.25%. The primary factor behind March’s disinflation compared to February is a 0.05% monthly decline in core goods prices, driven by a decrease in used and new car prices.
"A report in line with our expectations would leave us more confident with our call for the Fed to start its cutting cycle in June… a much firmer report is the key risk to our policy outlook,” Bank of America economist Stephen Juneau wrote.
Presently, market participants are estimating a 57% likelihood of a rate cut in June, while also factoring in a total of 70 basis points in Fed cuts by the end of the year.
CPI | February realized | March median consensus | March Highest (Wells Fargo) | March Lowest (BofA) |
| Core (M/M) | 0.4% | 0.3% | 0.3% | 0.2% |
| Headline (M/M) | 0.4% | 0.3% | 0.4% | 0.3% |
| Core (Y/Y) | 3.8% | 3.7% | 3.8% | 3.7% |
| Headline (Y/Y) | 3.2% | 3.4% | 3.5% | 3.3% |
The most recent inflation report for February, released on March 12, came in hotter than expected, with the annual headline CPI rate reaching 3.2%, surpassing the anticipated 3.1%.
The annual core CPI rate slowed from 3.9% to 3.8%, though it still surpassed market projections of 3.7%.
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