Core CPI Overtakes Headline CPI
New York Stock Exchange Futures, Pay Attention to Fall
The U.S. consumer price index (CPI) rose 5.0% year-on-year in March, lower than the market expectation (5.1%), the lowest in two years. However, rising service prices are still a concern, with core CPI rising 5.6%, overtaking the headline (overall) CPI. Immediately after the CPI announcement, the market paid attention to the downward trend in prices, with futures on the New York Stock Exchange rising and US bond yields showing a downward trend.
The U.S. Department of Labor announced on the 12th (local time) that the CPI rose 5.0% year-over-year and 0.1% month-on-month in March. It was a significant slowdown compared to February’s 6.0% and 0.4%, the lowest since April 2021. That’s what it was like 2 years ago. It is analyzed that energy prices and used car prices fell significantly by 6.4% and 11.2%, respectively.
The problem is the core CPI, excluding energy and food, which are highly volatile. The core CPI overtook the overall CPI for the first time in 27 months, up from 5.5% in February to 5.6% from the previous year due to rising housing and service prices. Compared to the previous month, it rose by 0.4%, indicating that service prices are still sticky and cannot fall.
The Ministry of Labor said, “The housing cost, which increased by 8.2% from the previous year, offset the decline in energy prices, leading the CPI to rise in March.” “Food prices did not rise from the previous month.”
| year | month | CPI increase rate (%) | Core CPI Growth (%) |
| 2021 | 9 | 5.4 | 4 |
| 10 | 6.2 | 4.6 | |
US inflation shock | 11 | 6.8 | 4.9 |
| 12 | 7 | 5.5 | |
| 2022 | One | 7.5 | 6 |
| 2 | 7.9 | 6.4 | |
| 3 | 8.5 | 6.5 | |
| 4 | 8.3 | 6.2 | |
| 5 | 8.6 | 6 | |
| 6 | 9.1 | 5.9 | |
| 7 | 8.5 | 5.9 | |
| 8 | 8.3 | 6.3 | |
| 9 | 8.2 | 6.6 | |
| 10 | 7.7 | 6.3 | |
| 11 | 7.1 | 6 | |
| 12 | 6.5 | 5.7 | |
| 2023 | One | 6.4 | 5.6 |
| 2 | 6 | 5.5 | |
| 3 | 5 | 5.6 |
As a result, attention is drawn to the Federal Open Market Committee (FOMC) meeting of the US Federal Reserve (Fed) on May 2 and 3. Immediately after the announcement of the CPI in March, the market turned into a cheering mood. The prices of technology stocks and 2-year Treasury bonds, which are sensitive to the US benchmark interest rate, each showed an upward trend, while the value of the dollar showed a downward trend. According to the FedWatch of the Chicago Mercantile Exchange, investors in the futures market of the US base rate slightly raised the possibility of the Fed freezing, but still weighed in the possibility of a baby step (0.25%) at 66%.
The day before, John Williams, president of the Federal Reserve Bank of New York (Fed), hinted at a rate hike, saying, “We are not seeing signs of a credit crunch in the US, and inflation is too high.” Noting the possibility, he hinted at the possibility of a freeze by saying, “(The central bank) must be cautious and patient in order to grasp the impact of financial sector pressure on the real economy.”
Jeff Rosenberg, senior portfolio manager at BlackRock, told Bloomberg TV, “The market is reacting to the overall CPI decline, but the labor market is still hot and service wage inflation pressures are rising. We can say that prices have been put in order only when we see service prices also falling,” he said. He went on to add that “if prices continue to stick with a likely recession, the economy will become even more fragile.”
New York =
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.