ISRAEL: Inflation May Have Ticked Lower In March
Israel will report March inflation data at 16:30BST/18:30IDT, with consensus looking for a moderation to +3.2% Y/Y from +3.4% prior. The February print was a notable downside surprise compared with Bloomberg median estimate of +3.7%.
- Goldman Sachs expect inflation to remain steady at +3.4% Y/Y. They note that 'shekel strength drove last month’s large downside surprise to inflation, and we expect to observe the inverse in the March print, as ILS has sold off aggressively, by 4.9% in trade-weighted terms.' They 'expect shekel weakness to pass-through into imported food and goods inflation,' but also 'expect this to be offset by base effects in core and fuel inflation and lower fuel prices in March.'
- JP Morgan note that 'CPI in Israel is expected to continue the string of relatively soft prints of recent months, yet risks are probably skewed to the upside as March may have seen the first leg of passthrough from weaker ILS and, potentially, mild supply effects from renewed fighting in Gaza and worsened security situation.'
- MUFG expect inflation to slow down to +3.2% Y/Y from +3.4% prior. They write that shekel strength 'drove last month’s decline in inflation, and we expect to observe the opposite effect in the March reading, as ILS has sold off aggressively, by ~5.0% in trade-weighted terms.' This followed 'the breakdown of the ceasefire and hostage deal in Gaza; and trade policy uncertainty from US President Trump’s recent tariff announcements.'
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
