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Notes from the Desk | US Inflation Mar 14 2023

Notes from the Desk – US Inflation

Chairman Powell is certainly earning his $190k salary, dealing with a battle on two fronts.

 

Today’s CPI data makes things a little more difficult for Chairman Powell as both headline and core CPI met expectations.

 

The main cause for concern is that the monthly gains on ex-shelter core (what Powell is concentrating on) accelerated from 0.36% to 0.5%.  The Fed will not be too pleased with this.


Implications:

In isolation, today’s inflation data would support at least a 25 bps hike next week.  But given the acuteness of the problems with US regional banks and fears of contagion, we think the decision hinges on whether there are deeper problems here.  For now, the balance of CPI and financial stability has the market tilting the odds towards a 25 bps move.

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