The same story has been repeating itself since the start of the year: inflation was higher than expected in the United States last month, once again. Investors, already very worried about price developments while the economy continues to resist a restrictive monetary policy from the Federal Reserve, no longer believe that the Fed will be able to ease its rates in June. The consumer price index stabilized at 0.4% in March, both in global and core versions. On an annual basis, overall inflation accelerated to 3.5% and, excluding food and energy, it remained at 3.8%. This is a tenth more than expected by the Bloomberg consensus.
Around 2:45 p.m., the Cac 40 lost 0.3% to 8,017.3 points, while it was close to 8,100 points just before the publication of the American Department of Labor. Futures contracts on Wall Street indices, which had been rising slightly until now, are now falling from 0.8% to 1.2%.
The reaction was immediate and violent not only on the stock market but also on the bond market, since the yield on ten-year American bonds soared by 13 basis points, to more than 4.5% for the first time since November. Expectations of a Fed rate cut in June have diminished. This is now estimated at 20%, according to the CME Group’s FedWatch tool, compared to 54% in the morning.
Fed minutes under surveillance
The market will monitor the publication, in the evening, of the minutes of the last meeting of the monetary policy committee. The dot plot, reflecting the projections of changes in interest rates by each member of the Fed, showed that a total reduction of 75 basis points was anticipated in 2024. Since then, many have warned the market against excessive optimism and some have even raised the possibility that there will be no reduction at all. Raphael Bostic, head of the Atlanta regional office, reiterated last night his preference for a single reduction this year, and in the fourth quarter only, a forecast that is nevertheless likely to evolve depending on the economic situation.
The minutes “are worth examining to see if the meeting participants adopted a more aggressive tone during the discussions than that adopted by Jerome Powell during his press conference.” Public comments from several FOMC members suggest this is a real possibility,” said Richard Moody, chief economist at Regions Financial Corp.
On the value side, Edenred lost 3.5% while Jefferies began monitoring at “underperformance”, the analyst explaining in a note that the payment service provider is facing several major headwinds including fierce competition in its main activity of meal vouchers.
