US DATA: Tariff Pause Limits A Still Huge Climb In Inflation Expectations
Apr-25 14:14
- 1Y inflation expectations: 6.5% (cons 6.8, prelim 6.7) in the final April release after 5.0%, lower than expected but nevertheless the highest since 1981.
- 5Y inflation expectations: 4.4% (cons 4.4, prelim 4.4) after 4.1%.
- Interestingly, and helpfully, U.Mich broke out developments in responses over the month to the question on 1Y inflation expectations. It's a necessary addition as the preliminary survey had come through Mar25-Apr8 just prior to Trump’s partial tariff reversal with a lowering of reciprocal tariffs and the 90-day pause whilst dialling up pressure on China.
- See text and chart below: “inflation expectations evolved with major trade policy announcements this month. After the April 9 partial pause in tariff increases, inflation expectations ebbed but remained substantially elevated relative to March. Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents."
- The chart makes it clear that 1Y expectations had been running between 5-6% in early readings before the Apr 2 "Liberation Day" tariff announcements after which they surged to nearly 10% before the pause and then eased to 7-8% thereafter (implying another strong climb in next month's survey).
- Full release here.
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Mar-26 14:11
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US OUTLOOK/OPINION: Cleveland Fed Staff On PCE Inflation Residual Seasonality
Mar-26 14:08
- The concept of residual seasonality, whereby data exhibit a seasonal pattern even after adjustment (and seemingly especially so for inflation data), has been a contentious topic.
- Cleveland Fed’s Lunsford finds evidence of residual seasonality across five measures of PCE inflation (headline, core, market-based core, median and trimmed mean) when looking across data from 1987 to Jan 2025. Full note here.
- “For core and market-based core PCE inflation, average inflation in January has been 1.5 to 2.0 times higher than in November and December, again, depending on the sample period.”
- “Following the high inflation from 2021 through 2023, these residual seasonal fluctuations can complicate assessments of monthly data, making it hard to know if inflation is returning sustainably to 2 percent.”
- The research finds the most prominent upward bias is in January alone rather than seeing any lingering into February.
- We note that for February as it comes ahead of Friday’s February report which sees core PCE inflation at 0.3% M/M but perhaps only just rounding down to this rate according to unrounded estimates. It follows 0.285% M/M in Jan, 0.21% in Dec and 0.10% in Nov (before any revisions).
US: SFR call spread
Mar-26 14:05
0QM5 97.12c vs 2QU5 97.50c, bought the 2yr for half in 10k.
