On Thursday, April 10th, the U.S. Bureau of Labor Statistics released a report stating that the Consumer Price Index (CPI) for March saw a larger-than-expected decrease.
The Consumer Price Index (CPI) is a broad measure of the cost of goods and services in the U.S. economy. In March, the CPI, seasonally adjusted, decreased by 0.1%, bringing the 12-month inflation rate down to 2.4%, lower than February’s 2.8%.
Excluding food and energy, the core inflation rate on an annual basis was 2.8%, with a month-to-month increase of 0.1%. This marks the lowest core inflation rate since March 2021.
The sharp decline in energy prices helped suppress inflation, with gasoline prices falling by 6.3%, leading to a 2.4% decrease in the energy index. Food prices, on the other hand, rose by 0.4%. Egg prices increased by 5.9% month-on-month and saw a 60.4% increase year-on-year.
Housing prices, one of the stubborn components of inflation, only rose by 0.2% in March, a 4% increase year-on-year, marking the smallest increase since November 2021. The price of used cars dropped by 0.7%, while the cost of new cars only rose by 0.1%.
In March, airfare prices decreased by 5.3%, motor vehicle insurance by 0.8%, and prescription drug prices by 2%.
Stock Market: U.S. stock index futures briefly pared losses and then further declined by 2.11%, indicating a weak opening on Wall Street.
Bonds: The yield on the 10-year U.S. Treasury initially fell before rising to 4.3276%, slightly higher than before the data release; the yield on the 2-year Treasury fell to 3.837%.
Forex: The U.S. dollar index slightly declined by 1.3%, while the euro continued to rise, up by +1.53%.
Peter Cardillo, Chief Market Economist at Sparta Capital Securities, told Reuters, “This is good news, indicating that inflation is receding, which is also good news for the Federal Reserve. Overall inflation has declined to 2.4% year-on-year, approaching the Fed’s 2% target.”
He added, “I expect this will trigger a fairly strong rebound in the bond market, with the 10-year U.S. Treasury yield possibly falling to a low of 4.15% in the coming days.”
Cardillo continued, “The bottom line for the market is that we can expect the rebound from the (President) Trump (tariff) reversal to continue. If this cooling of inflation persists and the U.S.-China trade war ends within a reasonable time, then I believe the Fed is likely to cut interest rates two to three times this year. Otherwise, I expect only one rate cut.”
Sean O’Hara, President of Pacer ETF Distributors, told Reuters, “This is likely mainly related to energy, which affects everything… this is good news for the economy and consumers. Hopefully, this is enough to prompt the Fed to take action. They’ve been lagging on rate cuts.”
O’Hara said, “I don’t think market trends have much to do with the CPI data. We just had a historic day with everything sharply rising. I expect the market to gradually stabilize.”
He pointed out that three issues have been troubling the market: tariffs, which are obvious; the lack of unity in Congress to introduce a tax plan that would benefit both businesses and individuals in the long term; and the need for action from the Federal Reserve.
Max Wasserman, Founder and Senior Portfolio Manager at Mirama Capital in Illinois, told Reuters, “These numbers are meaningless, the key lies in factors that have not been considered, namely the tariff factor. The real importance lies in the next set of data. At the moment, this is not a big deal.”