Today, we are publishing the fourth paper in a series of five on inflation and what it means for financial markets. In this paper we look into what it means for fixed income. See Part 4: EUR Fixed Income - Misaligned rates and inflation markets .
In the US, we have two important data releases. Based on the higher-than-expected CPI data in January, we estimate PCE core rose 0.3% m/m (close call between 0.3% and 0.4% in the case of CPI, so do not be surprised by a 0.4% print here). We think this would be enough to lift the PCE core inflation rate to 1.6% (consensus 1.5%). ISM manufacturing is also due out today and we estimate the index to have been broadly unchanged around the current level of 59.1. We have seen mixed signals from Markit PMI and regional PMIs.
The Fed's Jerome Powell is due to testify before the Senate Banking Committee but we do not expect him to say anything new. In our view, Powell was slightly hawkish on Tuesday, see Flash Comment US: Powell says 'personal outlook has strengthened'.
In the UK, we estimate the PMI manufacturing index stayed around 55.3 in February. Also, keep an eye on any new Brexit comments and possible leaks from PM Theresa May's speech tomorrow (usually leaked late afternoon).
In the Scandies, PMI manufacturing is due in both Norway and Sweden.
To read the entire report Please click on the pdf File Below: