US headline CPI not expected to show any marked improvement – Rabobank

FXStreet (Barcelona) - The Rabobank Team previews the US inflation data to be released today, noting that the headline CPI is expected to come in at 0.0%yoy, largely driven by falling oil prices.

Key Quotes

“The US session sees the release of March inflation data. Given the recent FOMC minutes were quite specific in tying the timing of the first rate hike to further improvements in the labour market as well as signals that inflation will move back towards the Fed’s medium-term goal of 2%, this inflation data may trigger market participants to mull over their rate hike expectations again.”

“That said, headline CPI is not yet expected to show any marked improvement. The consensus sees the CPI come in at 0% y-o-y (the same rate as a month ago), which is in line with the FOMC’s expectations that inflation will remain low over the short-term.”

“Note that this low headline reading is to a large extent driven by the low energy prices, as also highlighted by the substantially higher core inflation (expected at 1.7% y-o-y). While headline inflation is more volatile than the core reading, it is also the figure that is most visible to the average American, and therefore headline CPI is likely to play an important role in the Fed’s policy decisions.”