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Powell Suggests That Rate Cut Timeline is Delayed

Rates rise again after Powell and other Fed members offer hawkish commentary. Swap rates and Treasury yields rose yet again today as the post-CPI bond sell-off train keeps on chugging. Yields rose 5-8bps across the curve while the 2y UST yield touched over 5% momentarily before closing at 4.99%. The dollar had its best five-day gain since October 2022 as the Dollar Spot Index climbed over 106, its highest level since November. Meanwhile, stocks continued to struggle, the S&P 500 and NASDAQ down ~0.20% today.

Chair Powell says recent economic data show lack of progress on inflation. Today, Fed Chair Powell said rate cuts may come later than expected after recent inflation data. Core CPI has exceeded survey estimates on either a MoM or YoY basis over the past 4 months, and March inflation data showed no signs of a slowdown. Powell said, “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence.” He added, “We can maintain the current level of restriction for as long as needed.”

China GDP exceeds estimates, but concerns remain. China’s Q1 economic growth was greater than expected, as GDP increased 5.3% over the quarter (vs. the 4.8% estimate). The data was a positive signal after the nation established a 2024 growth target of 5%, though troubles remain. Retail sales and industrial output were lower than expected in March, and much of the 5.3% bounce came in January and February. Broader real estate issues linger as well, with property investment and new property sales down 9.5% and 27.6% in Q1, respectively. As Moody’s economist Harry Murphy Cruise briefly summarized, “The property market’s woes are continuing.”

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