The jump in headline CPI inflation to 3.3% in March, from 2.4%, was as expected due to the surge in energy prices, with the more important development for the Fed being the lack of any major accompanying upward pressure on core prices. Nonetheless, our preliminary estimate suggests that the 0.20% m/m rise in the core CPI will still translate into another above-target-consistent 0.32% gain in the core PCE deflator.
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