1. INFLATION
• The Consumer Price Index (CPI) rose 0.4% month-over-month and 6.0% year-over-year on a seasonally
adjusted basis through February, according to the Bureau of Labor Statistics’ March 14th release. Both
the monthly and annual measures decelerated from January.
• Last month’s annual inflation rate was the lowest since September 2021, while the previous two months
have seen a rise in monthly inflation after slowing to 0.1% and 0.2% in the final months of 2022. Core
prices have risen by 5.5% over the past 12 months, the lowest annual climb since 2021, but registered their
highest monthly increase since September.
• Shelter accounted for roughly 70% of monthly price increases, rising 0.8%. Food prices rose 0.4%, while
energy prices fell by 0.6% month-over-month.
• Eyes now turn to the Fed — with their March policy meeting on the horizon, markets have tried to
telegraph their upcoming policy decision in the face of tight labor markets, recent US bank collapses, and
mixed inflation data. Following Tuesday’s CPI release, futures markets coalesced around a 25 basis point
forecast for next week’s policy decision.
2. SILICON VALLEY BANK CRISIS
• The March 10th collapse of Silicon Valley Bank — and Signature Bank a few days later — became the
largest US bank failures since the 2008 financial crisis. For the former, a requested capital raise triggered
a crisis in confidence among depositors who feared a deterioration in bank liquidity, triggering a run on
the bank and, eventually, government intervention.
• The collapse highlights the risk posed by a rising interest rate environment on the financial system,
resurfaces questions about moral hazard in banking, and complicates the Federal Reserve’s hawkish
stance as it prioritizes price stability amid high inflation.
• Markets initially fell in the wake of the bank failures but have rallied in the days since as federal intervention
and reduced fears around contagion restore confidence in the financial system.
• While regulators stepped in with depositor guarantees and public assurances to help affirm faith in the
financial system, futures markets have adjusted their forecast for the upcoming FOMC rate-hike decision
to reflect an expected 25 basis point hike, down from a projected 50 basis point hike that markets
predicted just a few weeks ago.
