The consumer price index (ICC) report that must be on Wednesday will be the first under the mandate of President Donald Trump, with cooling signs that will increase the possibility of an interest rate cut and raise the spirits of investors in risk assets, which have been hammered in recent weeks.
It is forecast that the Office of Labor Statistics says that the main inflation decreased year after year to 2.9%of 3%, while central inflation, which excludes volatile food and energy prices, also lost 0.1 percentage points to 3.2%.
The slowest inflation increases the possibility of an interest rate cut, which makes more risky investments more attractive. The CPI, which measures the cost of a basket of goods and services throughout the economy of the United States, has accelerated for four consecutive months.
In recent weeks, the S&P 500 has fallen almost 10% of its historical maximum and Bitcoin (BTC) has lost around 30% to around $ 80,000.
Both Trump and the Treasury Secretary, Scott Besent, have emphasized the need for lower 10 -year treasury treasury yields to reduce the federal fund rate. Until now, this strategy seems to be operating, with the 10 -year yield falling to 4.2% of 4.8%, the weakening of the dollar index (DXY) below 104 and the crude WTI oil that is stabilized in the medium range of $ 60, aligning with the administration’s economic plans.
Meanwhile, the trufflation index has reached 1.35%, its lowest level since September 2020. However, inflation expectations of five and 10 years remain above 2%, indicating that Trump still has work to do in the management of long -term inflation expectations.
At the meeting of the Federal Open Market Committee (FOMC) from March 18 to 19, President Jerome Powell is expected to maintain the federal fund rate in constant 4.25%-4.50%, according to the CME Fedwatch tool.
Investors will closely observe the inflation report, since a fresher impression could lead to the Federal Reserve to consider fees. On the contrary, an “hot” inflation reading would probably maintain the highest rates for a longer time and exert more pressure on risk assets.
