Wall Street investors and stakeholders alike will be watching tomorrow’s Consumer Price Index report which is forecasted to rise at 0.3% over last month. They are waiting to see if inflation is slowing, a sign that interest rate cuts could be coming soon. But a lot more hinges on the report, including food and gas prices, two of the things most Americans pay most attention to when it comes to inflation.
Here’s the top 5 things to pay attention to:
- Core CPI to follow a desinflation trend
Economists forecast prices to round off at 0.3% over the last month down from 0.4% in February. Core good prices, which exclude volatile oil and food prices, are expected to slow, following a desinflation trend.
2. Shelter prices are likely to come in strong
If inflation is coming down, it has to be from the services sector, said Chris Low, Chief Economist at FHN Financial. Rental prices, which are reflected in the shelter component of the CPI, are predicted to continue ascending due to supply side home shortages felt most acutely in populous cities like New York and Chicago.
This means that rent and home mortgage prices, both of which are already expensive, are likely to show faster rises. Although the Zillow Observed Rent Index has shown some hope for prices to soften, these only account for new home prices, not renewable rent.
3. Oil and commodity prices are up
When people vent about inflation, they talk about two things: grocery bills and gas prices. Oil and commodity prices are anticipated to be higher for the month of March following a 1.1% rise in February. Oil prices, currently at $90 a barrel, are expected to rise faster because of shrinking refinery capacities amid closures and weather related damage from January’s winter storms.
4. Inflation will weigh heavy on consumer confidence
When it comes to gauging the health of the economy, oil and food prices are the likely measure for most consumers. Expected higher oil and food prices are likely to add to the disconnect between a strong economy at 3.4% GDP growth, and poor consumer perceptions of it. President Biden is counting on a confident economic outlook for reelection, but according to the latest Consumer Confidence Board report “Bidenomics” may be facing a hurdle with consumers expecting a recession.
5. When will the Fed cut rates?
We don’t know. After the pandemic, the Fed quickly ramped up monetary policy to avoid a likely recession, hiking interest rates up to their highest in nearly 20 years at 5 – 5.25%. But the tide may be turning, as inflation, which is down from its 9% peak and currently sits at 3.2%, inches towards a more sustainable 2% target. The Federal Reserve said in March that it will hold rates but that “employment and inflation goals are moving into better balance.”