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US Consumer Sentiment, Inflation Expectations Stable In March

By Reuters
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US Consumer Sentiment, Inflation Expectations Stable In March

U.S. consumer sentiment and inflation expectations were little changed in March, a survey has shown.

The University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 76.5 this month, compared to a final reading of 76.9 in February. Economists polled by Reuters had forecast a preliminary reading of 76.9.

'Trajectory Of The Economy'

"Consumers perceived few signals that the economy is currently improving or deteriorating," said Surveys of Consumers Director Joanne Hsu in a statement.

"Indeed, many are withholding judgment about the trajectory of the economy, particularly in the long term, pending the results of this November's election."

The survey's reading of one-year inflation expectations were unchanged at 3.0% in March. The survey's five-year inflation outlook held steady at 2.9% for the fourth straight month.

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Borrowing Costs

Elsewhere, U.S. central bankers are not expected to cut borrowing costs this week, but their new economic projections may be a wild card, potentially signalling fewer interest rate cuts and a later start to the policy easing than they previously had estimated.

Keeping interest rates at the current high levels for a longer period of time could have big implications for American households and businesses, especially in a presidential election year when the state of the economy is already a central talking point.

Market bets still point to the Federal Reserve's June 11-12 meeting as the most likely start for reductions to the central bank's policy rate, which has been in the 5.25%-5.50% range since last July.

But with inflation still running well above the Fed's 2% target and coming in stronger than expected in the first two months of this year, traders are pricing a 40% chance that the first rate cut only happens at the July 30-31 meeting.

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Bets in financial markets also point to an end-of-2025 policy rate in the 3.75%-4.00% range, a quarter of a percentage point lower than Fed policymakers forecast in December.

"Two months (of higher inflation readings) is too soon to declare that all is lost, but it certainly raises the risk that you have a little bit more of an inflation problem, and in that case it makes sense to be cautious," said Jeremy Schwartz, senior U.S. economist at Nomura Securities.

"You have to consider the possibility that it will take a longer period of restrictive policy."

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