Markets Prepare for Tomorrow’s Inflation Data

Rates nearly flat as inflation data is on deck. Swap rates fell nearly 1bp today as markets await tomorrow’s inflation data. A key macro-theme this year has been robust inflation and labor market data driving delayed rate cuts. Futures currently have ~40bps of rate cuts priced in this year, with September or November seen as the likely starting point. Elsewhere, major equity indices were little changed on the day, while heavily shorted GameStop highlighted the day after it rose 74% to ~$30 per share.  The rally was spurred by a cryptic tweet from Keith Gill, who played a large part in 2021’s meme-stock craze.

Producer Price Index (PPI) is expected to show mixed inflationary progress. Tomorrow’s PPI print will kick off a 2-day slate of inflation data, with consumer price figures set to follow on Wednesday. Core PPI is expected to fall to +2.3% YoY from +2.4% in March. Otherwise, the figures are not expected to show much progress toward 2% long-term inflation. Core MoM PPI is expected to stay flat at +0.2%, while headline data is expected to rise 0.1%. 

Consumer inflation expectations rise. The New York Fed reported that consumer inflation expectations climbed from 3.0% to 3.3% over the next year, the highest level since last November. Home price growth expectations also increased from 3.0% to 3.3%, the highest reading since July 2022. Consumer perceptions of the labor market and household finances also weakened. Separately, the Cleveland Fed said that inflation expectations among business executives climbed from 3.4% to 3.8% over the next year. The data comes following last week’s elevated UMich 1-year inflation expectations, possibly foreshadowing this week’s inflation data.