• US consumer price index (CPI) rose 0.1% in March and 5% YoY, shy of economist estimates
  • Minus volatile food and energy, core prices rose 0.4% and 5.6%
  • Energy costs fell, gas the main driver of lower prices, but that probably won’t last

Overnight we got some progress on US inflation, with the US CPI (consumer price index) read for March showing pretty clearly rising prices lost some of their oomph.

The US CPI for last month rose by 5% year on year, according to data published by the Bureau of Labor Statistics on Wednesday New York time. That ladies and gents, is its lowest level in nearly 2 years.

With these things of course there’s always a but and this one is that stubbornly high core prices could keep pressure on the US Fed to drive on with yet another interest rate increase next month.

Still, inflation did some notable moderating with falling US gas prices the hero of the dish, dragging enough to deliver the slowest pickup in prices since mid-pandemic.

The March CPI’s 5% read (YoY) is down a full 100 basis points from the 6% rise in February – a significant deceleration.

The closely watched core CPI – that’s the measure of underlying price pressures minus the volatile energy and food costs, still climbed rose by 5.6% year on year, the first acceleration in the yearly number since September and pretty solid evidence that price pressures for some goods and services in the states are still way too high.

So, some good news. The glass is half full, even despite obstinate core inflation – a wee downer for traders – and while US Treasury yields fell immediately after the data release they did pare back the retreat by lunchtime on Wall Street.

US markets were mixed after the data dropped and futures for the 3 main indices remain so.

Blurred lines

The similarly mixed inflation signals are a little bit of this and that. For example, I could say that price increases are meaningfully moderating but at the same time inflation has been slowing after hitting a peak near 9%, buy, aye me, the progress remains appallingly slow.

Best just accept we’re in an economic uncertainty log jam for now.

The US Federal Reserve has been trying to kill price increases dead for more than a year, hoisting interest rates to nearly 5% from near zero in March last year in the hope of cooling the economy and weigh on costs.

Officials are now assessing how their policy changes are working, and they are trying to gauge how much more they need to do to ensure that price increases come fully under control. Inflation has been slowing after peaking at about 9 percent last summer, but the process has been a slow one. It remains a long way back to the 2% inflation target that was normal before the onset of the pandemic in 2020.

Uncertainty over how quickly price increases will ease is being made hugely difficult by twitchy markets and another ridiculous run of bank blowups last month highlighted by the untimely demise of Credit Suisse.

The dovish Fed speakers want to play cautiously while the pitch turns like this, even as others say the central bank should throw its bat at toppy inflation.

The Fed officially targets a 2% inflation read, with those impatient central bankers flagging last week that they want further rate hikes and reckon the team should just stay laser-focused on squashing rising prices.

The Fed’s latest estimates, released shortly after the collapse of Silicon Valley Bank (SVB) and Signature Bank in March, suggest rates have another quarter-point in them this year, and look solid at just above 5%.

The Fed next makes its next policy move on May 3.