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Macro Markets

CPI

Wednesday morning, the CPI data for April will be released, which will give some insight into the Federal Reserve’s monetary policy is working against inflation. As of the last FOMC meeting, the Federal Reserve gave hints about possibly stopping rate hikes after May. Jerome Powell did mention that a pause was not part of their discussions; however, their press release typically said “some additional” hikes were removed instead of “determining the extent” of economic factors. With that said, it’s clear that some of the indicators that the Federal Reserve needs to remove rate hikes are present.

If CPI were to come back stronger, it might suggest that the Federal Reserve could factor in another rate hike. Many economists have forecasted that May would be the last rate hike we see. However, another rate hike is partially still in the cards for the Federal Reserve if data comes back negative. As we have mentioned all the past year, the Federal Reserve only cares about seeing inflation below 2.0%.

The inflation rate MoM is expected to increase slightly, while the inflation rate YoY is forecasted to move from 5.0% to 4.9%. One of the smallest decreases we have seen since the peak of inflation a year ago. The core inflation rate YoY is forecasted to stay at 5.6%, possibly suggesting some demand returning to the economy. Most importantly, the core inflation rate MoM is predicted to decrease from 0.4% to 0.3%. The shelter continues to be the most significant contributor to all monthly item increases. As demand increases in that sector with a limited supply, prices will continue to rise, creating inflation.

PPI

PPI is showing some mixed forecast numbers for Thursday. PPI will also give more data on how suppliers are inflating prices. PPI MoM is forecasted to return a positive 0.1% after a negative previous month's data print. The core PPI MoM also predicts a positive 0.2% increase after a -0.1% increase. While month-to-month data seems to present fluctuating demand for both CPI and PPI, the YoY PPI is expected to decrease from 2.7% to 2.4%.

These numbers would not be too alarming unless CPI and PPI were much higher. Historical evidence shows that inflation occasionally blips as buyers return to the market.

Data like this has been popping up across multiple markets, possibly due to the volatile rates. CPI and PPI will be this week's big economic data releases and will determine how the markets move in the short-medium term.

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