(The Herald Post) – The U.S. dollar experienced a decline on Wednesday following the release of data indicating a smaller-than-anticipated increase in consumer prices for March. This development has led market analysts to predict that the Federal Reserve may stop raising interest rates after a potential hike in May.
The March Consumer Price Index (CPI) rose by only 0.1%, falling short of the expected 0.2% increase and representing a drop from February’s 0.4% rise. The year-on-year CPI growth rate has diminished to 5.0%, the lowest since May 2021, compared to February’s 6.0% increase.
Core CPI, which excludes the volatile food and energy components, saw a 0.4% rise in March, following a 0.5% increase in February. Persistent rent increases played a significant role in driving core CPI.
Joe Manimbo, a senior market analyst at Convera, commented on the implications of the lower inflation figures for the Fed’s interest rate plans. According to Manimbo, the likelihood of a Fed rate cut later this year increases if the inflation rate stabilizes at 5%.
In light of the recent data, Goldman Sachs economists no longer anticipate a Fed rate hike in June. The dollar index fell 0.60% on the day to 101.49, and the euro reached its highest level since February 2.
San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin both acknowledged the need for further action on interest rate hikes. However, the release of minutes from the Fed’s March meeting revealed that some officials had considered pausing rate increases due to concerns over the potential impact of regional bank failures on financial stability.
The upcoming retail sales data on Friday will provide further insight into how consumer spending is being affected by rising prices.