1) U.S. February PPI also beats expectations; retail sales are somewhat disappointed
U.S. final demand-based producer price index (PPI) growth in February was 0.6% month-on-month, the sharpest in six months, data showed. The core PPI, excluding volatile food and energy, rose 0.3% month-on-month and 2% year-on-year. The hot PPI following the CPI suggests that deflation, which the Fed is going all out, is on an uneven path in the “last mile.” Meanwhile, U.S. retail sales rose 0.6% month-on-month in February, slightly below expectations. “In the fight between inflation and consumers, inflation is now winning,” Nuveen’s Saira Malik said, “and the Fed has said it wants to see widespread deflation before starting rate cuts, but that’s not the case yet.”

2) Bond traders brace for Fed dot plot revision
Traders, who have been refracing expectations for the Fed’s 2024 base rate cut from more than six times to three times since the beginning of the year, are preparing for the possibility that the dot plot will be revised at the FOMC next week, when interest rates are expected to be frozen. It has become unclear whether the March dot plot will maintain its outlook for the third cut this year as producer prices confirm persistently high inflation following consumer prices in February. BofA points out that even if only two Fed members change their outlook to two, the median of the base rate expectations could be raised later this year. Michael Kelly of PineBridge Investments said it is also important whether to change the dot plot, which was expected to cut 100bp next year, adding, “The real key is not whether there will be two or three cuts this year, but whether there will be at least one cut next year.”

3) JPY fluctuates on report that the BOJ is set to end negative interest rates
The dollar-yen exchange rate fluctuated after a report that the Bank of Japan (BOJ) was preparing to raise interest rates for the first time since 2007. Jiji Press reported that the BOK is preparing to end its negative interest rate policy and plans to make a final decision after reviewing the total of the Chun-Tu answers. After the report, the dollar-yen exchange rate fell more than 0.2%, but rebounded immediately. “This could be the liveest central bank meeting, and no one wants to be burned on the wrong side of the market in advance,” said Helen Given of Monex. Bloomberg reported earlier that the BOK plans to determine whether to lift negative interest rates based on Rengo’s first round of Chun-Tu answers

4) ECB Sturranas Commissioner ‘Should Cut Interest Rate Twice Before August’
Greek central bank governor and European Central Bank (ECB) policymaker Yannis Sturranas said the ECB should cut its benchmark interest rate twice before August, regardless of the Fed, and twice more by the end of the year. “We need to start cutting interest rates as soon as possible so that monetary policy is not overly constrained,” Sturranas, a leading dovish, said. “I think it is appropriate to cut rates twice before the summer holidays, and that four cuts for the whole of this year are reasonable.” After his remarks, money markets maintained their bets on cuts this year. The probability of a fourth cut by the end of the year after two more cuts, starting with a 25 basis point cut in June, is reflected at 70%

5) U.S. Ambassador to China ‘Irony in protest of TikTok Prohibition Act’
Nicholas Burns, the U.S. ambassador to China, has been relieved of China’s strong opposition to the U.S. move to ban TikTok. “It’s so ironic,” he said, pointing out that Chinese government officials are using the U.S. X (former Twitter) platform to criticize the U.S., blocking X, Instagram, Facebook, and Google from their citizens. Burns said TikTok and advanced semiconductors are key issues in the U.S.-China economic confrontation, suggesting that the Biden administration is responding to China’s technological roll with a tougher attitude
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