Cue the Freakout

A Moving Average Makes Look Less Alarming

Inflation ran higher than estimates in March, freaking out everyone who thought that the Fed might lower rates at their next meeting.

Looking at a the inflation with a rolling average, the recent developments looks far less alarming:

Stubborn inflation pressures persisted in March, seriously weakening the case for the Federal Reserve to begin cutting interest rates in June.

The consumer-price index, a measure of goods and services prices across the economy, rose 3.5% in March from a year earlier, the Labor Department said Wednesday. That was a touch higher than economists had forecast and a pickup from February’s 3.2%.

Excluding volatile food and energy categories, so-called core prices rose 3.8% from a year earlier. Of particular interest to investors and economists who care mostly about recent trends, the increase in core prices was 0.4% over a one-month period. That was above economists’ expectations for a 0.3% gain. It matched the increases of the previous two months, which had also topped forecasts.

Stocks fell shortly after the opening bell Wednesday, with the Dow Jones Industrial Average dropping about 500 points. Yields climbed on U.S. government bonds after the report, reflecting bets that the data could help delay and diminish future interest-rate reductions. The yield on the benchmark 10-year Treasury note touched 4.5% for the first time since November, according to Tradeweb, up from 4.365% Tuesday.

Wednesday’s report had been hotly anticipated because Fed leaders had been willing to play down firmer-than-anticipated inflation readings in January and February as reflecting potential seasonal quirks. But a third straight month of above-expectations inflation data erodes that story and could lead Fed officials to postpone anticipated rate cuts until July or later.

The issue is not inflation, but the overreaction to it, and the fact that monetary policy has far less effect on it than in previous years.

As our economy has become more monopolistic and financialized, the impact of things like hedge funds buying up rental properties and price gouging, and oligopolies using their power to increase prices seem to have more effect.  (Greedflation)