NEW YORK (Reuters) – U.S. consumer spending was unchanged in March, while underlying inflation pressures remained strong, data from the Commerce Department showed Friday, which could see the Federal Reserve raising interest rates again next month.
Though inflation remains elevated, it is gradually slowing. The personal consumption expenditures (PCE) price index gained 0.1% in March after rising 0.3% in February. In the 12 months through March, the PCE price index increased 4.2% after climbing 5.1% in February.
MARKET REACTION:
STOCKS: S&P 500 futures extended slight losses and were down 0.2%
BONDS: The yield on 10-year Treasury notes slipped and was down 8 basis points at 3.448%; The two-year U.S. Treasury yield, fell and was down 5.8 basis points at 4.039%
FOREX: The Euro was barely changed off 0.42% and the dollar index was likewise steady
COMMENTS:
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“Year-to-year the numbers are good and the report shows inflation continues to move in the right direction. I suspect this will be helpful for the Fed to make its decision, but I don’t think we escape another 25 basis point rate hike at their next meeting.”
“Today’s numbers indicate what the trend has been, which is lower inflation. It’s still high but it’s something that the Fed needs to take into consideration.”
“The consumer is cutting back and disposable income has been eliminated. The economy has weakened substantially and there’s a possibility that we’re already in a light recession. So the Fed will probably signal that we’re nearing the end of the tightening cycle.”
JOE MANIMBO, SENIOR MARKET ANALYST, CONVERA, WASHINGTON, DC
“It’s another mixed bag of data, but what stands out is the frustratingly slow descent in core inflation. So, the dollar’s benefiting from elevated core inflation, which I think is leading the market to rethink the outlook for rate cuts later this year and I think it sets the stage for the Fed to reiterate that interest rates are likely to remain higher for longer.”
“I would say on balance, core inflation remaining elevated, that suggests that if the Fed does pause after May that the next move in rates could indeed be higher. Whether or not it’s the summer, whether or not it’s the fall, if we continue to see inflation making only a gradual descent that could give the Fed cover to restart rate increases.”
(Compiled by the Global Finance & Markets Breaking News team)
