Key Takeaways:
A smaller-than-expected increase in United States import prices for March is bolstering investor hopes that inflation is moderating, potentially giving the Federal Reserve more room to maneuver. The import price index rose 0.2% for the month, the Bureau of Labor Statistics said Wednesday, coming in below consensus forecasts of a 0.4% gain.
"This is a welcome sign for the disinflationary process," said Annalise Grasso, a senior economist at BofA Securities. "While volatile fuel prices are pushing the headline number up, the details show a significant softening in core import inflation, which is what the Fed wants to see."
The March data showed a sharp divergence between energy and non-energy costs. Prices for imported fuels jumped, contributing significantly to the headline increase. However, non-fuel import prices were flat, indicating that price pressures for many consumer and business goods are easing. Following the release, U.S. Treasury two-year yields edged lower by 3 basis points to 4.55%, while S&P 500 futures ticked higher.
The report suggests that the global inflation wave that has driven up costs for the past two years may be cresting. For the Federal Reserve, which has been aggressively hiking rates to combat inflation, the softer import price data could reduce the urgency for another large rate hike at its next meeting in May. Market pricing currently implies a 70% chance of a 25-basis-point hike.
This article is for informational purposes only and does not constitute investment advice.
