Investing.com – The United States hit a new 40-year high in March, accelerating its biggest rally since December 1981 to 8.5% y/y on a positive note, with a notable decline also in A.
According to analysts at Commerzbank (DE :), “unless the rate rises sharply again” the latest reading “could be a peak”, but inflation is not expected to “fall rapidly”.
“There isn’t a lot of good inflation data today,” said Matt Peron, director of research at Janus Henderson. “The best that can be said is that the rate was lower than expected, at just 6.5%. This could give some relief to markets that were preparing for the worst.”
According to Perron, the key now is “whether inflation has peaked and, if so, at what rate it will fall.” This reading “is likely to prevent further Fed action in the short term, but there is reason to believe that the underlying component of inflation will be sufficiently reduced by the end of the year,” the expert said.
Should the underlying index decline, it would ensure that “the most hawkish Fed action never happens. Indeed, this would be a ‘mid-cycle slowdown’ scenario, which remains our base scenario, albeit by a narrow margin,” Peron explained.
However, looking at Investing.com’s Fed rate watch tool and CME Fed Fund futures, the possibility of seeing a 0.5% rate hike at the May meeting is priced at more than 87%.