We all know that the consumer price index (CPI) is important to the Federal Reserve, even though the Fed Chair indicates a preference for the personal consumption expenditures (PCE) number.
Last week we had a hotter jobs number with the the unemployment rate falling to 3.4% with 290,000 new jobs created (although prior months were revised lower)–not what we want to see when I am hoping for a rate pause. Worse yet the market is priced for a rate pause–this spells a plunge in equity values next month if markets don’t readjust expectations prior to that time. Remember ‘data dependant’ which means we need a soft CPI report at 7:30 a.m. (central). We will have 1 more chance for soft job numbers before the next FOMC meeting in June (13th and 14th) so there is a chance to see softening numbers.
So I am ‘talking my book’ above–I want to see the banking ‘crisis’ be resolved and further raising of interest rates is not helpful in that regard. We have made progress on fixing the ‘crisis’ simply by getting the daily pounding of bank failure news off the ‘front page’ and hopefully banks are moving forward with fixing their balance sheets.
Ok–let’s go!! CPI is expected pretty much flat with last month-CPI at 5% year over year with core at 5.5% year over year. Substantial deviations from forecast will move markets sharply.