The headline CPI figure that was released yesterday shows that it dropped from 6.0% in February to 5.0% in March, but core inflation increased from 5.5% to 5.6%, which is worrying. While energy prices fell by 6.4% YoY and electricity and utility gas services are up YoY, gasoline prices are on the rise MoM after OPEC decided to tighten supply. Food prices are up YoY, with some items, like eggs, seeing significant increases, but meat, fruits, and veggies have seen MoM drops. Shelter and services inflation are both up YoY, with services inflation remaining well above the Federal Reserve's 2% target due to wage inflation caused by the overheating labour market.
EQUITY
US stocks closed lower on Wednesday after the Fed's March policy meeting minutes revealed concern among members regarding the regional bank liquidity crisis and signalled another policy rate hike in May. Although the CPI printed lower-than-expected figures, it remains above the Fed's target rate. Softbank continues to sell its stake in Alibaba amid increasing risk exposure in China.
GOLD
Gold prices reached a new peak on Wednesday as weaker US consumer prices fueled hopes for a rate hike pause. The price of gold closed at $2,014.95 per ounce, up 0.56%, while the dollar index fell 0.6%, boosting gold and other commodities. Some economists predict another rate hike, while others believe the Fed may call for a pause.
OIL
Oil prices rose 2% on Wednesday, to their highest in more than a month, after lower CPI raised hopes that the Fed will pivot or pause soon. The markets shrugged off the small build in US crude oil stocks, attributing it partly to a mandated release of oil from the US emergency reserve and lower exports at the start of the month.
CURRENCY
The Fed's March minutes and CPI data stabilized the greenback lower as the market expected hawkish action as the majority of members advocated for a quarter point hike. The yuan weakened as rising tension offset the dollar losses. The consensus for another rate hike fell, although it was higher than a rate pause.
