Hot Inflation Report Derails Case for Fed’s June Rate Cut
Beet:
Stubborn inflation pressures persisted in March, derailing the case for the Federal Reserve to begin reducing interest rates in June and raising questions over whether it can deliver cuts this year without signs of an economic slowdown.
The consumer-price index, a measure of goods and services prices across the economy, rose 3.5% in March from a year earlier, the Labor Department said Wednesday. That was a touch higher than economists had forecast and a pickup from February’s 3.2%. So-called core prices, which exclude volatile food and energy categories, also rose more than expected on a monthly and annual basis.
https://www.wsj.com/economy/inflation-march-cpi-report-interest-rate-239b7e5e
jaichind:
This means that the Fed is less likely to lower rates this year and blow up the Biden Treasury strategy of issuing short-term debt hoping to finance these debts later this year or early next year when borrowing rates might be lower due to Fed rate cuts.
The act of issuing short-term debt (bills) is highly unusual and usually only done during times of economic crisis. This is likely partly a bet on rate cuts as well as fears that selling too much long-term debt might run into liquidity problems. Now both legs of that bet might go against Biden
jaichind:
US CPI Urban Consumers Less Food & Energy which I know the Fed pays a lot of attention to continues at a rate of 3.8%. This does not sound like a level anywhere close to the 2% inflation target to justify any talk of rate cuts anytime in 2024.
lfromnj:
Yeah this isn't going down till we fix the deficit.
quesaisje:
And employment growth has remained strong, so the case for lowering rates immediately is looking weaker on both sides of the equation.
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