Tense calm ahead of CPI in the US: What to expect

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European markets in green this Tuesday -Ibex 35, CAC 40, DAX…- after the sharp falls of yesterday and waiting to know the data of inflation in the United States corresponding to the month of February.

“In principle, the growth rate is expected to have moderated in the month compared to January. If not, the pressure on the Fed to raise its benchmark rates will return and the tension in the markets will increase even more if possible, “they point out in Link Securities.

“However, the tension will remain latent, at least until it is clear that the situation of the US banking sector is under control,” these analysts add.

“The US CPI could continue its path of moderation to 6% general i.a. (vs. 6.4% previously and peak 9.1% in Jun-22) and 5.5% i.a. underlying (vs 5.6% previously and peak 6.6% in Sept-22), although with all the attention paid to services, where we have seen upward pressure in recent months, especially in leisure, whose cost is eminently labor and is a cause for concern for the Fed, “they reiterate in Renta 4 (BME:RTA4).

“We could also see pressure from used vehicles in light of the strong month-on-month increase in their prices in February. This CPI data, together with the employment report known last Friday (solid), should have been decisive for the amount of the Fed rate hike of March 22, although the financial instability caused by the situation of the SBV has led the market to discount +25 bps with a probability of 69% while 31% of the market no longer expects increases at next week’s meeting, “add these experts.

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“This compares with a +50 bps probability that reached 76% just a week ago, post-Powell before the Senate and pre-SVB (NASDAQ:SIVB). Likewise, the market, in addition to discounting only one more rise of +25 bp, is betting on three subsequent cuts (of -25 bps each) to 4% at the end of the year, something that seems excessive considering the still high levels of inflation and the solidity of the labour market”, they conclude in Renta 4.

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