Market Wire - US Price Growth Meets Expectations, Potential US Oil Release Dominates Market Action

Karl Schamotta, Chief Market Strategist, karl.schamotta@corpay.com

The Federal Reserve’s preferred inflation measure climbed as expected in February, supporting calls for at least two 50-basis point moves at coming meetings. Data from the Bureau of Economic Analysis showed the core personal consumption expenditures index climbing 0.4 percent from January, up 5.4 percent year over year - precisely aligning with consensus estimates. According to the Statement of Economic Projections published at the March meeting, Fed policymakers expected the index to rise 4.1 percent this year before slowing to 2.6 percent in 2023.

Household outlays climbed 0.2 percent in February, corresponding with a previously-reported 0.3 percent rise in retail sales.

Personal income climbed 0.5 percent month-over-month, recovering after flatlining in January. Wages and salaries climbed 0.8 percent, slightly outpacing the rate of inflation.

Yields remained stable after the release, and the US dollar held its ground.

North of the 49th, the Canadian economy turned in a respectable performance in January, expanding slightly even as the Omicron wave kept several provinces under lockdown. Numbers released by Statistics Canada this morning show a 0.2 percent month-over-month rise in real gross domestic product, with a 0.8 percent gain in less vulnerable goods-producing industries offset by a flatlining in the much larger and more exposed services sector.

A preliminary estimate suggested that the economy could expand 0.8 percent in February, but the loonie remained weak as developments in global energy markets overshadowed domestic developments.

Oil prices tumbled last night on news the United States is considering a months-long release of up to 180 million barrels from its strategic petroleum reserve. The drawdown, which reportedly could amount to a 1 million barrels a day, would help offset frictions in getting Russian seaborne cargoes to markets, and might mitigate strain as the OPEC group of exporters continues cautiously ramping up output. A formal announcement is expected at 1:30 this afternoon.