Market discounts further moderation in US headline CPI but indicates rebound in underlying

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Renta 4 : European stock markets open almost flat (Eurostoxx futures -0.2%, S&P futures 0%), on a day in which the main reference will be the US March inflation data (2:30pm). The market expects further moderation in headline CPI (5.1%e vs 6% year-on-year), but a rebound in core CPI (5.6%e vs 5.5% previously) after five consecutive months of decline from a peak of 6.6%. We will see its impact on the +25bp hike probability (to 5%-5.25%) at the May 3rd Fed meeting, around 70% after Friday’s strong employment report.

In addition, the minutes of the last Fed meeting, in which the Fed chose to hike 25bp in a context of strong financial instability after the failure of several regional banks in the US, will be released today. We will see if they quantify in any way the impact of the tightening of credit conditions in the wake of the financial turmoil, which according to Powell could amount to a 25bp hike and according to the analyst consensus could rise to 150bp, doing part of the Fed’s job.

In Japan, producer prices in March moderated to +7.2% (vs +7.1%e and +8.3% previously).

On the other hand, yesterday the IMF stated that it is too early to consider financial instability as over, even though the safety nets implemented by central banks and regulators have brought some calm back to the markets. The IMF expects a negative impact on credit conditions and, by implication, on economic growth. In this context, the IMF yesterday slightly cut global growth forecasts to +2.8% in 2023 and +3% in 2024 (-1 tenth in both cases with respect to January’s estimates) vs +3.4% in 2022.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.