Yesterday, the Labor department released the consumer prices data for the month of March. The data showed that consumer prices eased during the month, with gasoline being the main contributor. The data showed that consumer prices dropped by 0.1%. This was the first and largest drop in consumer prices since May 2017. This was against what the 0.2% gain investors had expected. On an annualized basis, the consumer prices rose by 2.4% which was the largest annual gain in a year. It followed a 2.2% increase in February
On the other hand, core CPI rose by 0.2%. This CPI excludes food and energy components that are considered volatile. On an annualized basis, the core CPI rose by 2.1%, which was the largest gain since February 2017.This reading is now higher than the 1.8% increase of the past ten years. It had increased by 1.8% in February.The reading yesterday on the core CPI was in line with what investors were expecting.
While the CPI numbers are important, the Federal Reserve officials track a different number. They prefer the personal consumption expenditure price excluding food and energy. This figure has always been below the target 2.0% since 2012.
Meanwhile, the Fed released the minutes of the previous meeting yesterday. The minutes showed that there was consensus among the Fed officials about the pace of rate hikes. The officials had a consensus that the economy was improving, aided by increased consumer and business spending. The spending was brought about by a tightening labor force and increasing wages.
However, they were all cautious about the recent talk of tariffs and the impacts that a trade war would have. There were also some members who believed that the committee should wait before implementing further hikes. The committee also considered changing the language for the next committee meeting from the accommodative policies we have been used to, to a neutral or restraining tone. The change in tone / language would mean that the committee will be moving from its supporting role that happened after the crisis, to one checking on growth.