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Concerns about a stock market crash are swirling ahead of the all-important March consumer price index (consumer price index) The report is due this Wednesday, April 10th.
So, what should we expect from this inflation gauge, which is receiving widespread attention?
Now, many forecasters are looking for hot predictions for March. In fact, economists wall street journal CPI is expected to rise by 0.3% in March. This will bring the annual inflation rate to 3.5%, significantly higher than February’s 3.2%.
Core inflation, which excludes the volatile food and energy categories, is also expected to rise 0.3% in March, actually improving slightly from 0.4% in January and February. That would lower the core interest rate from 3.8% to 3.7%, but it’s still a long way from the Federal Reserve’s long-held 2% goal.
Overall, this will result in a fairly rapid pace of inflation for the economy in March. Unfortunately, this doesn’t bode well for the stock market.
Interestingly, some economists believe that the March CPI could be the first “clean” inflation measure of the new year, as seasonal adjustments distort early inflation statistics.
“March will therefore be the first clear CPI statistics of 2024.” Tom Lee of Fundstrat. “Rather, we view the March CPI report as a better representation of actual inflation trends.”
Concerns about a stock market crash grow ahead of the possibility of a heatwave in the CPI
If forecasters prove their accuracy on the upcoming CPI, it could be a troubling indicator for the stock market. In fact, higher inflation will likely force the Fed to forego further rate cuts, which is a concern on Wall Street.
Traders are reacting somewhat emotionally to this year’s economic data, mainly because the data points to the possibility of a rate cut. Hot inflation numbers will send a message that central banks should refrain from cutting interest rates as a way to ensure prices come down.
This is likely to be the last straw for the Fed after the surprisingly strong March jobs report released last week. As the economy continues to perform well, central banks have every incentive to take a more aggressive path towards their disinflationary targets, primarily by keeping interest rates high.
Federal Reserve President Michelle Bowman has even reversed the central bank’s thinking. nurture Interest rates have risen again this year, surpassing their current 23-year high.
“While this is not my baseline outlook, if inflation stalls or even reverses, we may need to raise interest rates further at future meetings,” Bowman said last Friday. “We continue to see this risk.” “Reducing policy rates too soon or too soon could lead to a rebound in inflation, and further future increases in policy rates would be needed to return inflation to 2% in the long term,” he said. said.
On the date of publication, Shree Dua did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are subject to InvestorPlace.com Publishing Guidelines..
