Previous Trading Days Events 10.04.2024

The U.S. inflation report yesterday shook the markets as it showed that U.S. consumer prices increased more than expected in March leading financial markets to anticipate that the Federal Reserve would delay cutting interest rates until September. The third straight month of strong consumer price readings.

The latest labour market data showed that job growth accelerated in March, with the unemployment rate down to 3.8 from 3.9 in February. 

The data does not completely remove the possibility of Fed action this year, but it certainly lessens the chances the Fed is cutting the overnight rate in the next couple of months, said Phillip Neuhart, director of market and economic research at First Citizens.

Financial markets pushed back their expectations for the first rate cut to September from June, according to CMEs FedWatch Tool. They now expect only two rate cuts instead of the three envisaged by Fed officials last month. A minority of economists see the window for rate cuts closing.

The central bank has kept its policy rate in the 5.255.50 range since July. It has raised the benchmark overnight interest rate by 525 basis points since March 2022.

The strong inflation data should force the Fed to go back to the drawing board with regards to their monetary policy ambitions for the year, said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.

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