Another drop this month though is unlikely to be met with the same optimism as the inflation release may seem somewhat out of date given the current month’s developments.
Markets will be watching to see what the print is as it may still have some impact on rate cut expectations, even if that proves temporary it could lead to a spike in volatility.
Markets are currently anticipating that US headline inflation YoY will hold steady at 2.4%, with core inflation expected to remain resilient at 2.5%. Because the Federal Reserve has entered its mandatory “quiet period” leading up to the March 18th policy meeting, officials are restricted from providing public commentary on how they intend to navigate the current geopolitical crisis.
This silence leaves investors speculating on whether the Fed and its global counterparts will view the recent spike in energy costs as a transitory shock to be “looked through,” or as a fundamental threat to long-term price stability that requires a more aggressive policy response.
The central question facing policymakers is whether these supply-side pressures will trigger a “second round” of price hikes across the broader economy. If central banks conclude that the conflict’s impact on oil is temporary, they may maintain their current interest rate trajectories; however, if they perceive a genuine risk of inflation becoming entrenched, a shift toward higher-for-longer rates may be necessary to anchor market expectations.
The next week should be key as we have the CPI, PCE data releases ahead of the Fed meeting. The question is, will the conflict still be ongoing at that point and what will the Oil price be?
