Washington and Wall Street are eagerly awaiting the release of new inflation data this morning, as speculation grows that the Federal Reserve will continue to punt on cutting interest rates until later this year.
The Bureau of Labor Statistics will release the latest consumer price index covering the month of March at 8:30 a.m. Economists forecast that March’s core inflation number will come in at 0.3 percent, an improvement over February’s 0.4 percent increase, according to a Bloomberg survey.
The latest CPI data will arrive following a robust jobs report Friday, showing the U.S. economy is still running strong and may not need a boost as concerns about inflation persist. The Fed will next meet in June to decide whether to cut rates.
While the Biden administration has touted strong jobs and economic growth numbers, a rate cut by the Fed would likely also be a positive development for Democrats heading into the fall elections.
For one, it would show the Fed believes inflation — a key attack line from Republicans — has been tamed. It also would have the effect of making consumer loans, such as mortgages, cheaper.
Some Democrats have publicly called on the Fed to cut interest rates to help the housing market. But Fed Chair Jay Powell has said that will not drive the central bank’s decision-making.
In a sign that Wall Street is growing more skeptical that the Fed will cut rates soon, JPMorgan Chase CEO Jamie Dimon used his annual letter to investors this week to express concerns about inflation. Dimon argued that long-term economic, geopolitical and government spending trends pointed to higher inflation.
Dimon also said investors are overly optimistic about the Fed cutting rates in the coming months.
“These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates,” Dimon wrote. “I believe the odds are a lot lower than that.”
Powell has consistently said in recent weeks that the central bank expects to cut rates this year, but that it is waiting to see a string of good inflation numbers before acting.
— Dave Clarke
