Data Gives Bernanke No Reason to Change Tune

We were skeptical of yesterday's speculation that Bernanke would tout a less dovish line in his testimony before the Joint Economic Committee of Congress. And today's CPI figures underscore the reason why it may still be appropriate to look for rates to reamin low for "an extended period of time.".

Headline CPI rose 0.1% and the core was flat. The core CPI is flat for the entire first quarter. This is the weakest quarterly performance in more than a quarter of a century.

Excluding housing costs, core CPI rose 0.1%. Clothing prices fell 0.4% year-over-year, service prices were up 0.2%. Auto prices are up 5.3% year-over-year, while the medical care index rose 3.7% yoy.

Retail sales were a bit better than expected in March with a 1.2% headline increase and 0.6% excluding autos. The Feb series were revised 0.2% higher to 0.5% on the headline and 1.0% excluding autos. Excluding autos, gasoline and building materials, which is used to calculate GDP rose 0.5%, the same as in Feb.

The bottom line here is the consumption probably made a larger contribution to GDP in Q1 than in Q4. That said, there is risk that the March data is flattered by the earlier Easter.

The broad consolidative tone for the US dollar against the majors remains intact. Bernanke's testimony is awaited.
Data Gives Bernanke No Reason to Change Tune Data Gives Bernanke No Reason to Change Tune Reviewed by Marc Chandler on April 14, 2010 Rating: 5
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