US CPI report preview: Energy and food prices suddenly surged, coupled with the steady rise in housing costs, inflation growth in March will continue to accelerate
According to the Market Matrix (Matrix.net), economists expect consumer inflation in March to reach its highest level since December 1981 due to rising food costs, rising rents and out of control of energy prices.
On Tuesday local time, the U.S. Bureau of Labor Statistics (BLS) will release its March consumer price index (CPI). According to a survey by Dow Jones, economists expect the U.S. CPI to grow by 8.4% year-on-year and 1.1% month-on-month that month. In February, it was 7.9% and 0.8% respectively.
Chief economist Mark Zandi of Moody's Analytics said: "The situation will be bad. It's really full of crises - The Russia-Ukraine War, soaring oil prices, the COVID-19 pandemic, further supply chain disruptions, accelerated wage growth, and record job openings. It's just a chaotic situation that leads to painful high inflation. We are experiencing two large-scale global supply shocks. It's hard to imagine that inflation will not be higher."
According to a Dow Jones survey, economists expect core CPI to grow by 6.6% year-on-year and 0.5% month-on-month. In February, it was 6.4% and 0.5% respectively. "The good news is that oil prices do look to peak," said Diane Swank, chief economist at Grant Thornton. "The good news is that oil prices do look to peak." After the Russian-Ukrainian war broke out in late February, oil prices soared, and WTI futures prices reached a high of $130.50 in early March. On Monday, the price had fallen to around $94.
According to the American Automobile Association (AAA), gasoline prices also soared simultaneously, with the average price across the United States reaching $4.33 per gallon on March 11. It fell back to $4.11 per gallon on Tuesday.
gasoline prices fell, but are still at an unusually high level _By Bloomberg
Swank said: "The problem facing the Federal Reserve (Fed) is that inflation expands from commodities to services, and used car prices may rise again. Supply chain problems will not disappear. Their situation is getting worse."
Based on the cardinal effect only, economists say this month or next month may be the peak of inflation. Zandi expects CPI to drop to 4.9% by the end of this year.
is expected to tighten policies in a massive way to control the hottest inflation in 40 years. The market is expected to raise interest rates by 0.5 percentage points in May, and economists say it could also raise interest rates by 0.5 percentage points in June if inflation is overheated. "It was at least a 0.5 percentage point rate hike, and the balance sheet (QT) reduction has begun," Zandi said.
raised interest rates by 25 basis points for the first time in March after lowering the federal funds target rate to zero in early 2020.
FOMC March dot chart: interest rates are about 1.9% at the end of 2022 and about 2.8% at the end of 2023 _By Bloomberg
Jeferies' money market economist Tom Simmons expects the Fed to raise interest rates by 0.5 percentage points at the May 3 meeting, and he believes that the CPI report will not affect this decision. "If the data is much higher than expected, I don't think it will, but it will start talking about raising interest rates by 0.75 percentage points, or intermittently," he said. "Hot prices in CPI are expected to rise 18% in March. He said: "The first half of March was a period of soaring special energy prices after the Russian-Ukrainian war. Food prices are a similar story, but in different degrees... Housing costs will once again become a very important factor."
He expects the homeowner's equivalent rent or home costs in CPI to rise by about 0.5%, while rents should rise by 0.6% month-on-month. Housing costs are one of the categories that are expected to continue to rise. This will result in a 4.6% increase in housing, which accounts for one-third of CPI.
Swank said the rate of growth in housing costs is already the highest since the beginning of 1990 and is likely to continue to rise. “I think it has a risk of overheating,” she said.”
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