Core CPI

Core CPI

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  • The Labor Department reported on Wednesday that the consumer-price index, a key measure of inflation, rose 5% YoY in March, down from February's 6% increase and the smallest gain since May 2021. Although inflation has eased, the underlying price pressures suggests that the Federal Reserve may consider another interest-rate increase at its May meeting.
  • Investors initially reacted positively to the report, but the rally in stocks and Treasuries cooled off. Traders still expect a 25 basis-point rate hike at the Fed's May meeting and bets remain that the central bank will cut later in the year. However, inflation remains high, with the core CPI up 5.6% from a year ago, surpassing the overall measure for the first time in over two years. This is due to a sharp slowdown from the previous month and a comparison with March 2022, when energy prices surged following Russia's invasion of Ukraine.

Why it matters

The Fed raised interest rates 9 times in the past year to tame inflation during the pandemic's economic recovery with supply-chain disruptions and labor shortages. Officials expect 1 more rate increase this year and steady rates thereafter, given limited economic growth and decreased labor demand.


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