NEW YORK, (Reuters) – The U.S.’s monthly consumer price increase was the largest in the past 16-1/2 year in March. This is due to the fact that gasoline prices reached record levels in the wake of Russia’s invasion. It also cements the need for a Federal Reserve interest rate rise of 50 basis points next month.

According to the Labor Department, 1.2% of the consumer price index rose last month. This was the largest monthly increase since September 2005. In February, the CPI grew 0.8%.

The CPI increased 8.5% in the twelve months to March. The 8.5% increase in CPI year over year was the most since December 1981. This follows a jump of 7.9% in February. The sixth consecutive month that CPI readings exceeded 6% was this one.

STORY:

MARKET REACTION:

STOCKS: S&P e-mini futures extended gains were last up 1.09%, pointing to a firm open on Wall Street

BONDS: The yields of benchmark 10-year bonds fell to 2.718%. The yields on two-year Treasury notes fell to 2.417%

FOREX (The turned 0.25%)

COMMENTS:

MAZEN ISSA, SENIOR FX STRATEGIST, TD SECURITIES, NEW YORK

“There was a lot of focus on this print and it was being chalked up to be a very spicy print and that did not disappoint, especially the headline measure. I think the focus here will be that expectations for the core measure, albeit very high expectations, were underwhelmed.”

“Ultimately, I don’t really think that this inflation print really changes the price action in the FX space, because at the end of the day, we’re still sitting at 6.5% year-over-year core inflation and despite the slight moderation, it’s likely to remain elevated for the next several prints. And so, ultimately the forces that are justifying robust tightening by the Fed remain very much in place.”

THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL, NEW YORK

“You’re seeing futures are up because everyone came into this report expecting that inflation would be a lot higher than anticipated. What we are seeing instead is that month-to-month core CPI was slightly lower than anticipated. And that’s a very good thing because you really saw yields blowing out ahead of this event.”

“This is a very positive report for stocks and particularly for tech stocks, the long duration equities which have been left for dead as the 10-year yield spiked. This may be a short-term peak in yields and it may be an opportunity to get meaningful exposure into tech as it starts to finally get bid once again along with bonds.”

MICHAEL O’ROURKE, CHIEF MARKET STRATEGIST AT JONESTRADING, STAMFORD, CONNECTICUT

    “The numbers were basically in line with expectations. The cycle’s highest year-over–year CPI print is this. We will have this month’s reading, and we know that the readings for subsequent months should not be higher than 8.5%.

    “Considering the stock and bond sell-off coming into the number and the numbers are basically in line with expectations, we’re getting a nice buy-the-news relief rally … it should not change any expectations for monetary policy.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“Top line was ugly but the core rate was lower than we expected. This is not good news, but yields are coming off their high indicative of another bloodbath in the debt market.”

“The bottom line is inflation is going to stick around for a while, but we could see it begin to reverse in the summer months, provided we get some cooling off in agricultural and energy prices.”

“(Stock) futures are gaining strength, the market anticipated these numbers yesterday. Stocks are likely to have a positive trading session in anticipation of the banking earnings.”

“It’s nearly written in the stone that we’ll see a 50-basis-point rate hike in May and another in June. The Fed is behind the curve.”

(Compliled by the global Finance & Markets Breaking News team)