With the employment data out of the way and showing ongoing strength in the labor market through March, attention will turn to inflation numbers.

The March consumer price index (CPI) at 8:30 ET on Wednesday is expected to show similar upward price pressure after February’s 0.4 percent month-over-month gain and 3.2 percent year-over-year rate. The core CPI was also up 0.4 percent in February from January and up 3.8 percent compared to a year earlier. If upward price pressure on food prices has abated, energy prices – particularly for gasoline – continued to rise in March. Other commodities prices may have eased up for March after a rise in February. However, it is prices in the service sector that continue as a steady source of upward price inflation and have proven resistant to the current restrictive stance of monetary policy.

However, even if the inflation numbers are favorable, as far as the monetary policy outlook is concerned, the Fed has a dual mandate. If the two percent inflation objective is reached and policymakers have high confidence that inflation is tamed, there is still the matter of sustainable maximum employment. By most measures the Fed has achieved a soft landing for the US economy despite the rapid and substantial rate hikes of March 2022-July 2023. The FOMC will not want to risk the present modest-to-moderate expansion that has led to an unemployment rate that is stable and historically consistent with a tight labor market. In terms of setting monetary policy, as long as the economy is running along the lines of the FOMC forecasts, the outlook for rate cuts remains less certain.

The minutes of the March 19-20 FOMC meeting at 14:00 ET on Wednesday will reflect conditions from three weeks ago. Policymakers were cautious in their outlook for monetary policy then based on the available data. Reports released since have not changed the overall picture. There will be some nuance to the decision taken at that meeting, but there will be little fresh to alter the current expectations for the timing and size of future rate cuts.

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