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Inflation Rise to Delay Rate Cut ?

The consumer inflation data has come above estimated for two months straight. Given that analysts and other stakeholders are optimistic about the rate cuts that might happen this year. The recent releases are less likely to shake that optimism.

JP Morgan now expects 75 bps rate cuts in 2024 compared to 125 bps. Even the Fed Rate swap market now expects only three cuts compared to five previously. But the important question that arises is will central banks especially the Fed be able to ignore this data if it keeps rising till May?

The current CPI rise was due to apparel, airline fares and energy categories. There might be some seasonal adjustments in apparel and airline fares that might subside in the coming months. Thus, the important element to track becomes Energy.

Within the first fifteen days of March, the US gasoline prices are already up by 4% compared to last month. This trend could continue as crude oil prices rise too.

Given this rising trend any additional elements that surprise would only add to the upside risk of inflation. Will this cause central banks that currently estimate the first cut in June to delay it?


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