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US CPI Report Tame, Markets Shift Focus to Fed Minutes

Don Curren April 10, 2019

All-items inflation in the US was a touch stronger than expected on annual basis in March, but the core measure slipped lower, and in its entirety all the report indicated consumer price pressures in the US remain well contained.

The greenback edged higher against the euro and the Canadian dollar and the DXY dollar index was also slightly higher after the release, but the results were close enough to consensus to leave expectations of steady policy from the Fed unaltered, and thus didn’t provide much impetus to the US currency.

The Consumer Price Index increased 0.4% in March on a seasonally adjusted basis and 1.9% over a year ago, not seasonally adjusted, according to the US Bureau of Labor Statistics.

Economists were expecting the all-items inflation reading to rise by 0.3% on a monthly basis in March and expected the headline index to rise by 1.8%.

The index for all items less food and energy rose 0.1%, softer than the 0.2% rise anticipated by economists and was up 2%, a 13-month low, the BLS said.

The energy index increased 3.5% in March, accounting for about 60% of the seasonally adjusted all items monthly increase, it said. The gasoline index increased sharply, and the electricity index also rose.

The food index also increased in March, with the indexes for food at home and food away from home both continuing to rise.

The BLS said the indexes for shelter, medical care, new vehicles, recreation, education, and tobacco were among those increasing in March, while the indexes for apparel, used cars and trucks, and airline fares declined.

The currency market’s attention will now shift to the release of the minutes of the Fed’s March 19-20 meeting, scheduled for 2 pm ET. The minutes may provide more insight in to US central bank’s view of inflation and other economic dynamics in the US.

In its policy statement on March 20, the Fed’s Open Market Committee cited changes in “global economic and financial developments” and “muted inflation pressures” as reasons to be “patient.”

The balance of the week is bereft of major economic data in North America, something which will likely reinforce the recent relatively range-bound trading in the US dollar on a broad, trade-weighted basis.

But developments in trade and geopolitics may inject some momentum into currency markets, with the Trump administration suggesting it may launch tariffs against the European Union, and the continuing travails of the UK on its road to Brexit likely to create some volatility in the pound.

Bottom Line: The muted price pressures evident in US CPI data for March provide yet more support for expectations the Fed will remain on the policy sidelines for quite some time. Further information about the Fed’s view of inflation may be forthcoming in the minutes of its March policy meeting later today.

Don Curren
Market Strategist and Content Editor
Twitter: @dbcurren

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