March Inflation Report Puts Fed Narrative to the Test

• March CPI report is first test of “inflation bump” thesis; further high inflation would challenge Fed’s narrative • Consensus expects some moderation, but still high 0.3% monthly inflation in March • Base effects mean annual inflation likely to accelerate from June even if monthly stays at 0.3%
• Commodity price inflation major threat, with oil and gold suggesting risks of inflation spiraling • CPI surprise to downside only hope for Fed rate cuts; else recession and bear market likely