The CPI report extends good news from February, but the effects of the next tariff will still come

The US dollar is declining today and one of the reasons is that the consumer price index in March was less than expected. This must be given the Federal Reserve and the opportunity to reduce prices, especially as oil prices drop by another 4 % today in yesterday’s jump.

CIBC breaks the consumer price index today and it is noted that it is the second negative surprise in a row. They notice that inflation in basic non -housing services decreased sharply to 2.9 % of 3.8 % and has been at its lowest level since 2021.

“Although this good news for the Federal Reserve, the later announced increases in the definitions of China will enhance inflation and uncertainty still after stopping for 90 days in the customs tariff for other countries announced, which still leaves the basis rate of 10 % healthy for that period.”

This is rubbing and indicators so far from federal reserve officials are that they are not fully prepared to look through the effects of customs tariffs.

The great driver to reduce the consumer price index was less than gasoline, but they also noticed a 0.8 % decrease in car insurance rates, which was a continuous source of inflation. On the other hand, food enlarged 3.0 % in March from 2.6 % previously.

The operation of the effects of the upcoming customs tariffs is the decrease in the long bets in the rents and the mortgage costs that work in the numbers. This month, although the decrease in shelter was only due to a decrease of 4.3 %/m in hotel prices, a worrying sign for travel.

CIBC writes:

This report extends the good news that has been received about inflation in the previous month, but it is clear that the intensification of definitions since then will start moving forward in the upcoming data, as companies will transfer higher costs for consumers, in line with the fictional evidence and what was seen in the 19th/2018 trade war with China. Although the customs tariff for countries higher than 10 % have been stopped for 90 days (for example, China and some other exceptions), the constant uncertainty will continue to influence feelings of feelings and investment in the United States, leaving the federal reserve with the challenge of balance the risk of bullish inflation with the deterioration of the labor market. We expect the Federal Reserve to remain suspended on the first of this year and they continue to rely on data throughout the year.

The current market pricing is 102 basis points in mitigation next year, with a fully reduced price at the June 18 meeting.