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Next week sees a swath of economic releases, but only two data points really matter to a market, and Fed, now obsessed with inflation data.Deutsche Bank’s Carl Riccadonna notes FOMC members will be watching next week’s inflation data ahead of the April 26 meeting.
While there is a lot of inflation news to digest, the March CPI (+0.4% vs. Unch.) is arguably the most important, because it covers both goods and services. In particular, we will watch two key themes: The first is whether shelter inflation (which makes of about 40% of the core) continues to accelerate; the second will be the degree to which price increases are becoming increasingly broad-based. The inflation expectations component of the April consumer sentiment report will also garner close scrutiny. The March readings moved significantly higher, and if sustained could be an early warning that the Fed’s inflation fighting credibility is eroding.