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The Knudson File: CPI Inflation Data for March 2022 Out Tomorrow – How Will Markets React?

CPI Inflation data for March 2022 is due out TOMORROW (April 12, 2022) Tuesday at 8:30 am. It is predicted that initially, markets will react badly to the news since people are at the moment a bit jittery.

This is the past 12 months of data for all CPI.  So, the March 2021 data point of 0.6 will drop off and be replaced by March 2022 data.   Looks like a replacement of 0.6 is conceivable. 

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Energy costs and Used car price spike are causing choppiness in the month to month data. Below is energy costs. The GREAT news is the spike outlier of 5.0 for March 2021 will drop off. However, Russian invaded Ukraine in late February and gas prices spiked in March 2022 and have remained high. I don’t think the new data point for March 2022 will be above 5.0.  If it is below 5.0, we may have a lower inflation rate number.

Energy

If we can get past tomorrow, then the SPIKES caused by Used Car Prices will start rolling off in the next month’s data releases of April 2022 data. The Used Car Prices are THE MAIN driver of the run up in Core Prices.

If tomorrow’s March 2022 is tame, it won’t be enough to cause the Fed to back off on increasing rates but it may give them the air cover needed to keep with just 25 bps increases in upcoming FOMC meetings. 

If CPI is real ugly tomorrow, all bets are off and get ready for rapid Fed increases. They must maintain credibility to the bond market that they are #1 when it comes to fighting inflation.

Used Cars and Trucks

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