In US March CPI data due for release on 10th April, we expect Core CPI inflation accelerated to 0.29% m-o-m in March from 0.22% in February, due to a rebound in core goods and rent inflation. Strong consumer demand and supply shortages of key materials appear to have boosted consumer goods prices. We forecast a 0.29% m-o-m advance in core goods prices, up from 0.08% in February. We expect super core CPI inflation decelerated only slightly to 0.34% m-o-m in March from 0.350% in February. A sharp increase in gasoline prices likely led to double-digit m-o-m inflation in CPI energy prices. Our forecast for headline CPI is 1% m-o-m, the highest since June 2022. Our forecasts for CPI and PPI translate into a 0.26% m-o-m increase in core PCE inflation for March, which corresponds to y-o-y inflation of 3.1%. We now expect core PCE inflation to drift above 3.0% y-o-y throughout the year, although the 3m change rate will likely decelerate in H2 2026. From Fed's policy perspective, March CPI report might demonstrate some signs of newly emerging sources of price pressures, which is unlikely to help alleviate inflation risks among policymakers. Hence, we now expect the Fed to delay its lone 25 bps cut to Q4CY26 this year (our prior forecast was for June and September). US markets are currently pricing in only 20% probability of a rate cut in REMCY26 which looks under whelming to us. Hence, we like to receive 1yr-1yr US SOFR around 3.75 levels (currently 3.61) for a profit target of 3.50 with a stop loss at 3.90. We also like 2*10 US steepeners at current levels of 22. We have a profit target of 40 in this trade with stop loss at 15.
