Good news on inflation

Inflation in the U.S. for the month of March was published yesterday and came up better than expected. The good news is core inflation YoY growth was below 3% for the first time in years. If you look at the hart below, it has taken more than 3 years to reduce core CPI growth in half. This is very important because we need deflationary pressures in place to balance the inflationary effect of tariffs, if they’re ever enacted and applied. Also it’s important because If the trend continues, the Fed has some room to lower rates if we enter a recession. The probability of a rate cut, obtained from Fed funds futures, is still a timid 27%, but the probability of recession in the U.S. according to pokymarket is 63%, so it wouldn’t be surprising to see the Fed odds ramp up as we approach May 7th.

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