Chief Economist Scott Brown discusses the latest market data.

The $1.9 trillion fiscal package passed both chambers of Congress and was signed by President Biden. In a prime-time speech, Biden promised that vaccines will be available to all adults by May 1, with a return to a sense of “normal” likely by July 4. Long-term Treasury yields fell early in the week but rose again on Friday.

The Consumer Price Index rose 0.4% in February (+1.7% y/y), up 0.1% (+1.3% y/y) ex-food and energy. Homeowners’ equivalent rent (24% of the overall CPI and 30% of the core CPI) rose 2.0% over the last 12 months, vs. 3.3% in the 12 months before that. The Producer Price Index rose 0.5% in February (+2.8% y/y). Ex-food, energy and trade services, the PPI rose 0.2% (+2.2% y/y). The report showed higher prices of raw materials over the last year, but it takes a huge increase in commodity prices to have even a modest impact on consumer prices. The TIPS spread was consistent with an expectation of 2.5% inflation over the next five years, but near 2% from the five years after that.

Next week, the Federal Open Market Committee is widely expected to leave short-term interest rates unchanged and to maintain its monthly pace of asset purchases (at $120 billion). Senior Fed officials will revise their projections of growth, unemployment and inflation, and we’ll get a new dot plot (which shows individual expectations of the federal funds rate). In his post-meeting press conference, Chair Powell is expected to downplay temporary increases in inflation and repeat that the central bank would need to see the economy get back to full employment with inflation at or above 2% for some time before raising short-term interest rates. February retail sales and industrial production reports should reflect bad weather.

As of close of business 03/11/2021