SPX: S&P 500 Falls 1% After Hot March Inflation Slams Rate Cut Prospects

Analysts were expecting inflation to pick up. But consumer prices exceeded the already high expectations. Now rate cuts may not happen this year at all.

Key Points:

• S&P 500 drops 1% on hot inflation.
• Prices increased by 3.5% in March.
• Data complicated Fed’s rate timeline.
• The S&P 500 moved lower by 1% Thursday after traders retreated in the face of a rising inflation threat. For March, the consumer price index (CPI) turned up to 3.5%, surpassing expectations for a 3.4% rise, and also topping February’s 3.2% clip. The figure will likely have major implications across the board.
• Most importantly, it could sway the Federal Reserve to reconsider its interest rate timeline and the three planned cuts this year. Officials at the central bank, as the Fed minutes showed yesterday, need to see a sustained drop in price pressures toward the Fed’s 2% goal.
• Best case scenario would be a delay in lowering borrowing costs. Prior to the CPI report, markets were hoping to get the first rate cut when Fed policymakers meet in June. Now, this timeline isn’t so certain. The Fed is meeting again April 30-May 1 and what happens then will shed light on what happens next.