The Report on the Consumer Price Index (ICC) owed on Wednesday will be the first under the mandate of President Donald Trump, with cooling signs likely to raise the chance of a drop in interest rate and cheer up investor morale in risky assets, which have been hammered in recent weeks.
The Bureau of Labor Statistics should indicate that the inflation of securities has decreased from one year to 2.9%compared to 3%, while basic inflation, which excludes volatile food and energy prices, also lost 0.1 percentage point at 3.2%.
Slower inflation increases the chances of a drop in the interest rate, making more risky investments more attractive. CPI, which measures the cost of a basket of goods and services through the American economy, has accelerated for four consecutive months.
In recent weeks, the S&P 500 has dropped by almost 10% of its top of all time and Bitcoin (BTC) has lost around 30% against about $ 80,000.
Trump and the Treasury Secretary Scott Bessent both stressed the need for treasury yields to 10 years lower to reduce the rate of federal funds. Until now, this strategy seems to work, the 10 -year yield falling at 4.2% against 4.8%, the dollar index (DXY) weakening below 104 and stabilization of crude oil WTI in the $ 60 range – aligning the economic levels of the administration.
Meanwhile, the key index reached 1.35%, its lowest level since September 2020. However, inflation expectations of five and 10 years remain above 2%, which indicates that Trump has always work to do in the management of long -term inflation expectations.
During the meeting of the Federal Open Market Committee (FOMC) from March 18 to 19, President Jerome Powell should hold the rate of federal funds stable of 4.25% to 4.50%, according to the CME Fedwatch tool.
Investors will closely wait for the inflation report, as a fresher than expected print could encourage the federal reserve to consider rate reductions. Conversely, a “hot” inflation reading would probably maintain higher rates for longer and exert additional pressure on risk assets.
