US inflation is worse than expected

Source: Dukascopy Bank SA


The US Bureau of Labor Statistics has published the United States inflation data. The US Consumer Price Index monthly change, Core CPI and annual CPI change have revealed that inflation is even higher than expected. Financial markets reacted to the new information by buying the US Dollar and selling off other assets.

Month on month CPI was expected to show an increase of 0.3%. Actual reading is higher, at 0.4%. The Core CPI which excludes food and energy was forecast to also show an increase of 0.3%. This reading is also at 0.4%. In the meantime, annual inflation expectations were for an increase of 3.4%. Actual inflation is 3.5%.

In general, the markets expected annual inflation to increase its pace, as in March inflation was at 3.2%. The released data shows that it is worse than expected.

Combined with the last week's US monetary policy maker comments of no rate cuts during 2024, these news are causing a change in market expectations. Futures markets previously priced in three rate cuts with the first one in June. After the inflation data release, markets price in two rate cuts with the first one in September. However, note that prior to the high inflation being revealed, the Federal Reserve committee, which sets the Dollar base rate, was divided upon doing only one cut not three or two.
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