Today, the Bureau of Labor Statistics released the US CPI data for March. The annual inflation rate has increased by 5% while the month-on-month price rise has been 0.1% in March. The all items index increased 5.0 percent for the 12 months ending March; this was the smallest 12-month increase since the period ending May 2021. The all items less food and energy index rose 5.6 percent over the last 12 months. The energy index decreased 6.4 percent for the 12 months ending March, and the food index increased 8.5 percent over the last year.

US inflation decreased more than anticipated in March, fueling optimism that the Federal Reserve’s monetary tightening is about to come to an end. Wall Street is projected to open higher as US inflation slowed more than anticipated in March, as US stock futures tracking the broader market rose 1% on Wednesday.

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US Fed’s efforts in fighting inflation is showing up in numbers. The annual inflation rate in the US declined from 6.4% in January to 6% in February 2023, after decreasing for eight consecutive months. However, despite having dropped from a decade-high of 9.1%, inflation is still much higher than the central bank’s goal rate of 2%.

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Going forward, all eyes will be on the FOMC meeting to be held on May 2-3. The US Fed is expected to announce rate hike decision of 25bps on May 3 and may go for a pause before starting to cut rates in 2024. Given the recent surge in oil prices brought on by OPEC+’s announcement of an unexpected drop in crude production on April 2, the Fed’s future path may not be as clear-cut as it first appears.

The US Fed could continue hiking interest rates if the annual US inflation rate remains stubbornly high. However, as a result of the SVB banking crisis and increased interest rates decimating the financial sustainability of numerous US regional banks, there is mounting pressure on the US Fed to proceed cautiously. Market participants, analysts, investors, and traders constantly analyse the US CPI data in order to make investment decisions for their portfolios.