Wednesday, April 10, 2024

Inflation, Higher Than Expected, Analysts React

 Via ZeroHedge, April 10, skipping past the intro:

....With that in mind, here is a snapshot of kneejerk reactions by various other Wall Street economists and strategists to today's print courtesy of Bloomberg.

Morgan Stanley economist Ellen Zentner is the first sellside to warn her June rate-cut call is in jeopardy:

“The upside surprise in core CPI is moving the inflation data further away from the convincing evidence the Fed needs to start cutting in June. Dependent on the PPI data tomorrow, this print tilts the Fed toward a later start to the cutting cycle than our current forecast for June.”

Brian Coulton, chief economist at Fitch:

“The so-called ‘Super-core’ CPI  measure – services excluding rents – jumped from 3.9% y/y in February to 4.8% in March. This latter metric is heading the wrong way and quite quickly at that.”

David Kelly, Chief Global Strategist at JPMorgan asset management:

“I wish the Federal Reserve would pay more attention to what they do to financial markets with their manipulation of interest rates and not worry too much about what they are doing to the economy. Last decade, we mispriced housing terribly and now a large chunk of younger Americans can’t buy a house.”

Anna Wong, Bloomberg economist:

“March is a month where the CPI enters a seasonal window that’s favorable for disinflation. The fact that core CPI remained the same in March as February — even if it maps to about 0.3% in core PCE inflation terms – is not a good development. This report, more than February’s, is likely to feed Fed concern that progress on disinflation is stalling — even though the core print for the two months was the same.”

Marvin Loh, State Street economist:

“While the rent component shows a strong disinflationary trend, the more important owner’s occupied component is stubbornly unchanged and well above what is needed to get towards a stable 2% level.”

Ira Jersey, Bloomberg rates strategist:

“The 3-month annualized core CPI climbing to 4.5% is going to keep early Fed-cut calls muted coming up. 50 bps of cuts in 2024 currently being priced may not occur until later in the year. The yield curve flattening isn’t surprising as we continue to price out early and deep cuts.”

* * *
“The timing of 2024 rate-cut expectations are front of mind for market participants, with linear markets pricing just below even odds of a first cut in July. Still, the stickiness of ‘supercore’ inflation, now north of 8% on a 3-month annualized basis, may continue to put upward pressure on expectations of the Fed’s terminal floor.”

* * *

“A retest of 4.51% is nearly assured with the higher-than-expected CPI. If that doesn’t hold, 4.7% is the next stopping spot for the 10-year yield.”

Seema Shah, economist at Principal Asset Management:

"Today’s print sealed the fate for the June FOMC meeting with a hike now very unlikely. In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to heavily intrude with Fed decision making.”

Priya Misra, JPM rates strategist:

”This was a pivotal report for the market since the last 2 reports were a little high (0.4% mom) and the Fed viewed those readings as a ‘bump in the road’ rather than a change in the trend towards inflation moderation.Rates have risen in the last few weeks as cuts have been priced out but there is more room to go. I also think risk assets will be sensitive to rates if the 10y moves above 4.5%. So far risk assets could ignore the high inflation prints since the Fed was dismissing it. But I think that changes now... Most of the strength in the core explained by firmer motor vehicle insurance costs and medical care -- both of these do not feed into the core PCE deflator in the same way. So incoming Fedspeak will be very important”....