DAVY VIEW

Market expectations that core CPI inflation figures released today will accelerate to 5.6% in March will bolster expectations for a final rate hike from the Federal Reserve (Fed). Options prices are currently pricing in a 74% probability that the Fed will raise rates at its May 3rd policy meeting to a 5-5.25% target range, but the curve then falls to 4.6% by end-2023 and 3% by end-2024. On that point, today’s minutes of the March 21st-22nd policy meeting will help show how the Fed assessed the risks from the collapse of Silicon Valley Bank (SVB).