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Markets await US inflation update and Fed meeting minutes

by LLB Reporter
12th Apr 23 10:22 am

There is one key thing dominating the agenda today – US inflation figures. Markets have recently taken the view that the Fed needs to ensure stability in the financial system following the banking crisis.

That means easing back on rate hikes which could topple the economy.

Russ Mould, investment director at AJ Bell, said: “However, the reason why rates have been going up so fast over the past 12 months is down to rising inflation, so today’s update on the cost of living in March will still matter to the Fed and its monetary policy. The consensus forecast is a 5.6% rise in core inflation year-on-year, up slightly on February’s 5.5% reading.

“The rate of inflation in the US has been easing back since October 2022, providing some relief to consumers and businesses. However, if the rate comes in higher than expected at today’s reading then markets could easily throw their toys out of the pram. It would also stir the pot that the Fed might need to stay on its current path with rate rises.

“Further insight into the Fed’s current thinking will be found in the latest minutes of its interest rate committee meeting, published later today.

“Wall Street was mixed last night with the markets struggling to find direction ahead of the inflation figures. Europe was in a better place on Wednesday, including a 0.2% rise in the FTSE 100 to 7,801, led by utility companies and banks.

“Investors aren’t taking too many chances though, with demand for so-called ‘safe haven’ asset gold continuing to grow. The precious metal jumped a further 0.6% to $2,015 per ounce, meaning it has increased by 5.3% over the past 30 days.”

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