Inflation and Recession – March’s CPI Report and The Fed Minutes
Following the regional banking crisis, investors and everyday citizens were waiting to see what effects tighter rates would have on the broader scope of American inflation. Luckily, for the month of March, inflation subsided to 5% year-over-year, down from February’s 6%. The annually-based CPI is the lowest it has been in almost two years, depicting the effectiveness higher rates have had on slowing economic movement. Although positive, this is still far from the Federal Reserve’s target rate for inflation at 2%, with persistently high price pressures not eliminating the potential for another interest rate hike in May.
Regardless forecasts for the month of March were 5.2%, so invariably, the news sent markets to pursue older highs; however, this journey was thwarted by the release of the previous month’s Federal Reserve minutes, which are simply behind-the-doors recordings and documents of the Fed’s previous meeting in late March. What was discovered was a presentation on the crash of Silicon Valley Bank, leading to estimations claiming a high probability of a “mild” recession later this year. The current economic forecasts depict a national GDP of 0.4% for the year 2023, with the next two years showing signs of improvement and recovery. Regardless, the news sent markets lower despite the enlightening inflation data, with investors left waiting to hear from the Federal Reserve’s next meeting on May 3rd.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.