On an annualized basis, the Consumer Price Index data is forecast to decline to 5.2% and the Core CPI, which excludes volatile food and energy prices, is expected to edge a tad higher to 5.6% from 5.5% registered in February.
Meanwhile, the headline CPI data is seen rising 0.3% MoM in February, compared with a 0.4% increase reported in February. Similarly, the Core CPI is projected to increase by 0.4% in the same period, down slightly from 0.5% previously.
The US CPI data will hold the utmost relevance, as the Federal Reserve tries to figure out whether another rate hike will be needed to bring inflation back down to the 2% target. Renewed concerns over the negative impact of rising interest rates on financial stability following the collapse of Silicon Valley Bank forced the Fed to adopt a cautious stance at its last policy meeting on March 22. The Fed hiked its policy rate by 25 basis points (bps) to the range of 4.75%-5% as expected but noted that tighter credit conditions are expected to weigh on economic activity, hiring and inflation.
Economists at Commerzbank see the potential for an extended recovery in the US Dollar:
“A relatively more restrictive Fed with an accompanying fall in inflation would be ideal. Let us not forget: in itself a fall in inflation (i.e. a reduced erosion of the Dollar’s domestic purchasing power) is a positive argument for the currency involved. Only a negative rate outlook might affect this image or might even reverse the situation. If that does not arise this is the best imaginable situation for USD bulls.”
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