**As seen in Risk In The Week report 04/05/24, subscribe at cablefxm.co.uk/reports
U.S. February consumer prices rose 3.2% Y/y, the headline was faster than both the prior print and the consensus forecast of 3.1%. Core CPI eased from 3.9% to 3.8%, the lowest figure since April 2021. Core services continue supporting higher prices while core goods reported a second month of negative contributions. Food prices contributed 30.0bps while energy took off 13.0bps from the headline, both metrics aligned with the preceding trend. Shelter costs continued to be the major driver of inflation in February, prices eased to 5.7% Y/y from 6.0% in January, which was the lowest figure since July 2022. A gauge of services prices, the super core CPI, slowed to advance 0.47% M/m from the prior 0.85%, the metric remains above pre-pandemic trends despite the easing.
Looking ahead, the Bloomberg Economic Nowcast stands slightly above the consensus median, the latter looks for core CPI to slow down to 3.7% Y/y. Bloomberg's Nowcast inflation model records negative contributions from average national gasoline prices, PPI, and import prices. For the headline, Barclays stands in line with the consensus as they pencil inflation accelerating to 3.4% Y/y, and the March forecast range goes from 3.3% to 3.5%.
The desk at J.P. Morgan has recently revised their call on the Fed, analysts noted positive supply-side developments in line with Powell's benign tone. However, the absence of any cracks developing on the demand side should give the Fed an excuse to delay policy easing, analysts added. J.P. Morgan expects the Fed to cut interest rates three times which is more dovish than current market pricing, they pencil rate reductions in July, September, and December. For the March inflation figures, J.P. Morgan sees the headline at 3.4%Y/y and the core at 3.7% Y/y.
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