After a fun few weeks of training our anxieties on the wobbly financial system, it's time to zoom out and collectively wrestle with that other demon hovering over the global economy.
Hello, inflation, my old friend…
Here's the deal: Inflation may not have dominated the headlines the past few weeks, but that's because we headline writers were (a) busy chronicling a financial panic, and (b) waiting for CPI Day, as we refer to the Wednesday when the government releases its data on consumer prices for the previous month.
Here's what to expect tomorrow:
- The March figures are expected to show inflation fell to around 5.2% from an annual rate of 6%.
- Core CPI, which strips out volatile fuel and food costs — and is pretty much the only number the Fed cares about right now — is expected to come in 0.4% higher from the previous month.
Why it matters:
While the headline figure may look like good news for consumers, it's unlikely to persuade the Fed to cut or even pause interest rate hikes.
"To feel good about where inflation is headed, we need to see more than just moderation in the rate of both headline and core inflation," wrote Greg McBride, chief financial analyst at Bankrate. "We also need to see moderation in price pressures across a wide range of categories that are staples of the household budget: shelter, food, electricity, motor vehicle insurance, apparel, and household furnishings and operations."
BIG PICTURE
After some encouraging disinflationary news earlier this year, economists and officials seem to be coming back around to the "when, not if" recession guessing game. Inflation is proving stickier than many of them expected. And then the financial chaos of the past month raised the prospect of a credit crunch, which would slow the economy even more.
All of that led the International Monetary Fund to lower its forecast for global economic growth to 2.8% this year, from 3.4% in 2022.
"Uncertainty is high, and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled," the organization said in its latest report.
Of course, not everyone is quite so gloomy. The Biden administration is projecting cautious optimism, with Treasury Secretary Janet Yellen underscoring that the economy — especially the job market — remains strong despite all the turmoil of the past four weeks.
"I'm not anticipating a downturn in the economy," Yellen said. "Although, of course, that remains a risk."
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