NEW YORK (Reuters) – U.S. monthly consumer prices increased by the most in 16-1/2 years in March as Russia’s war against Ukraine boosted the cost of gasoline to record highs, cementing the case for a 50 basis points interest rate hike from the Federal Reserve next month.
The consumer price index surged 1.2% last month, the biggest monthly gain since September 2005, the Labor Department said on Tuesday. The CPI advanced 0.8% in February.
In the 12 months through March, the CPI accelerated 8.5%. That was the largest year-on-year gain since December 1981 and followed a 7.9% jump in February. It was the sixth straight month of annual CPI readings north of 6%.
STOCKS: S&P e-mini futures extended gains were last up 1.09%, pointing to a firm open on Wall Street
BONDS: Yields on benchmark 10-year notes fell to 2.7118%. Two-year Treasury yields fell to 2.4177%
FOREX: The dollar index turned 0.25% lower
MAZEN ISSA, SENIOR FX STRATEGIST, TD SECURITIES, NEW YORK
“There was a lot of focus on this print and it was being chalked up to be a very spicy print and that did not disappoint, especially the headline measure. I think the focus here will be that expectations for the core measure, albeit very high expectations, were underwhelmed.”
“Ultimately, I don’t really think that this inflation print really changes the price action in the FX space, because at the end of the day, we’re still sitting at 6.5% year-over-year core inflation and despite the slight moderation, it’s likely to remain elevated for the next several prints. And so, ultimately the forces that are justifying robust tightening by the Fed remain very much in place.”
THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL, NEW YORK
“You’re seeing futures are up because everyone came into this report expecting that inflation would be a lot higher than anticipated. And what we’re actually seeing is that the core CPI, they came in slightly lower than expected, particularly month-on-month core CPI. And that’s a very good thing because you really saw yields blowing out ahead of this event.”
“This is a very positive report for stocks and particularly for tech stocks, the long duration equities which have been left for dead as the 10-year yield spiked. This may be a short-term peak in yields and it may be an opportunity to get meaningful exposure into tech as it starts to finally get bid once again along with bonds.”
MICHAEL O’ROURKE, CHIEF MARKET STRATEGIST AT JONESTRADING, STAMFORD, CONNECTICUT
“The numbers were basically in line with expectations. This is expected to be the high print for year-over-year CPI for the cycle. When we get this month’s reading and you know subsequent readings they should be lower levels than 8.5%.”
“Considering the stock and bond sell-off coming into the number and the numbers are basically in line with expectations, we’re getting a nice buy-the-news relief rally … it should not change any expectations for monetary policy.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“Top line was ugly but the core rate was lower than we expected. This is not good news, but yields are coming off their high indicative of another bloodbath in the debt market.”
“The bottom line is inflation is going to stick around for a while, but we could see it begin to reverse in the summer months, provided we get some cooling off in agricultural and energy prices.”
“(Stock) futures are gaining strength, the market anticipated these numbers yesterday. Stocks are likely to have a positive trading session in anticipation of the banking earnings.”
“It’s nearly written in the stone that we’ll see a 50-basis-point rate hike in May and another in June. The Fed is behind the curve.”
(Compliled by the global Finance & Markets Breaking News team)