13 April 2023
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Pace of growth in headline US CPI declined sharply in March

By Daniel Richards

The pace of growth in headline US CPI declined sharply in March, recording a value of 5.0% y/y, down from 6% y/y in February. This leaves the headline figure at its lowest value since May 2021. The annual decline can in part be attributed to base effects with the latest figure being compared to March 2022, when energy prices rose sharply following the start of the conflict in Ukraine. On a monthly basis headline CPI rose 0.1%, slightly below expectations for a 0.2% m/m rise and below the February gain of 0.4% m/m. The extent of the slowdown in the pace of growth was however not mirrored in core CPI, underscoring the recent stickiness seen in this measure of inflation. The core CPI measure rose to 5.6% y/y in March from 5.5% y/y in February. On the month this measure rose 0.4%, down slightly from the 0.5% m/m growth recorded in February. There were some encouraging signs with shelter cost inflation rising at a slower pace of 0.6% m/m. Markets are still pricing in another 25bps hike at the Fed’s May meeting.  

Minutes from the March 22 FOMC meeting, at which the Fed elected to hike rates by a further 25bp to take the upper bound of the Fed funds rate to 5%, have been published. The meeting took place amongst widespread uncertainty about the possible fallout following the collapse of three US banks. The minutes acknowledge that several Fed officials had considered pausing rate hikes at the March meeting, over concerns about vulnerabilities in the banking sector, suggesting that a pause would allow the Fed to assess the state of play more accurately. The minutes highlight the committees ongoing concerns about stickiness in inflation measures and strong economic data, with some members suggesting that they would have voted for a 50bp hike, absent the banking sector turmoil. Ultimately all committee members were convinced that enough had been done to “calm conditions in the banking sector and lessen the near-term risks to economic activity and inflation”. The minutes also stressed that the recent banking sector turmoil would in of itself likely cause a tightening of credit conditions. The committee voted unanimously for a 25bp hike, despite staff projections for the first time showing a mild recession starting in 2023. 

India’s headline measure of CPI fell back in March, to 5.66%, just below the upper limit of the Reserve Bank of India’s target range of 2%- 6%. The slower pace of growth was driven by weaker food inflation and favourable base effects.

Today’s Economic Data and Events

  • 10:00 UK monthly GDP Feb. Forecast: 0.1% m/m
  • 10:00 UK industrial production Feb. Forecast: 0.2% m/m
  • 16:30 US Initial jobless claims w/e Apr 8. Forecast: 235K
  • 16:30 US continuing jobless claims w/e Apr 1. Forecast 1835K
  • 16:30 US PPI Mar. Forecast 0.0% m/m

Fixed Income

  • US Treasuries initially pulled higher in response to the US CPI print which showed headline inflation slowing to 5% y/y in March from 6% a month earlier. But the moves were relatively short-lived, with yields moving higher toward the end of the day though there was limited response to the release of the March FOMC minutes. Yields on the 2yr UST ultimately closed the day lower, down more than 6bps to 3.9578% while the 10yr yield dropped about 4bps on the day to 3.3906%.
  • European bonds dropped for a second day running with bund yields up almost 6bps at 2.362% while gilt yields added 3bps to 3.564%.


  • The slowdown in headline inflation in the US along with a drop in yields helped to push the dollar lower against peers overnight. EURUSD added 0.7% to close at 1.0992 while GBPUSD rose almost 0.5% to 1.2485. USDJPY also moved in favour of the yen, down 0.4% to 133.13.
  • Commodity currencies also strengthened with USDCAD moving lower by 0.2% to 1.3442 and AUDUSD adding 0.6% to 0.6691 while NZDUSD gained 0.4% to 0.6213.


  • After initially gaining on the back of the inflation figures, the release of the FOMC minutes, and the likelihood of another rate hike to come, appeared to be the key driver in US equity markets yesterday, as all three major benchmark indices closed lower. As would be expected, the especially interest rate-sensitive NASDAQ was the most affected as it lost 0.9% on the day. The S&P 500 closed down 0.4% while the Dow Jones dropped 0.1%.
  • There was more positivity earlier in the day in Europe where the CAC, the DAX, and the FTSE 100 added 0.1%, 0.3%, and 0.5% respectively. The composite STOXX 600 added 0.1%.
  • Locally, the ADX added 0.4% while the DFM gained 1.5%. Saudi Arabia’s Tadawul closed up 0.8%, while Egypt’s EGX30 dropped 1.6%.


  • WTI prices hit their highest levels in 2023 overnight with futures adding a bit more than 2% to close at USD 83.26/b. Brent also added about 2% to close at USD 87.33/b as markets benefitted from a general relief rally on the back of slower US inflation.
  • The head of the IEA cautioned that oil prices were likely to move above USD 85/b in the second half of the year as the OPEC+ cuts help to tighten market balances. Fatih Birol called the surprise cuts “a bad surprise” for the global economy.
  • Commercial crude inventories added 600k b/d last week though there was a draw at the Cushing pricing point. Gasoline stockpiles also showed a modest draw. US oil production ticked up modestly, adding 100k b/d to 12.3m b/d.

Written By

Daniel Richards Senior Economist

Edward Bell Head of Market Economics

Jeanne Walters Senior Economist

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