Highlight of the Week
U.S. Inflation Eased to 5% in March
- US inflation fell to its lowest level in almost two years as measured by the Consumer Price Index (CPI).
- In March, consumers saw lower prices for items such as groceries, gasoline, medical care and utilities.
- At the same time prices rose for shelter, airline fares and insurance.
- While the easing of inflation is a sign that the economy is starting to cool off, there remains underlying price pressures which could result in additional rate hike at the FED’s meeting in May.
Rate Curves
Rapid Report:
What Looms on the Horizon Once the Fed Funds Rate (FFR) is Cut?
- Over the past year, the FFR has increased from 0.33% to 4.75%. While steep rate hikes are not uncommon the speed with which the rate hikes occurred has been unprecedented.
- The market expectation is that the FED will raise rates one more time and then hold them through year-end. After this period of holding, the expectation is that the FED will turn to cutting rates.
- While many would welcome cuts to the FFR, periods of prolonged rate cuts have seen large drawdowns on returns in equities after the FFR peaks.
- During these periods of declining rates, the S&P 500 has seen an average max drawdown of around 26%.
