So Much Expected So Little Delivered

Amid the more headline grabbing data of weak retail sales and consumer sentiment, the US Labor Department released March Producer Price Index. Here is a report from Reuters.

The Labor Department said its seasonally adjusted producer price index fell 0.6 percent last month, the largest drop since May, after increasing 0.7 percent in February.

Economists polled by Reuters had expected prices received by the nation's farms, factories and refineries to fall only 0.2 percent. 

In the 12 months through March, wholesale prices were up 1.1 percent, the smallest rise since July. Prices had increased 1.7 percent in February.

Underlying inflation pressures also were muted, with wholesale prices excluding volatile food and energy costs rising 0.2 percent for a third straight month.

With central bankers around the world working overtime in the quest of greater currency production, it has been widely predicted for a very long time that inflation will eventually pick up. However, eventuality does have a habit of toiling with her pursuers and is never in a hurry to arrive. The liquidity that has been created with extreme low interest rate has flown mostly into supporting asset price instead of increasing consumption. In turn, the elevation of asset price is justified by the sustainability of low interest rate. By policy, the US Federal Reserve controls in short end of the interest rate curve and now quantitative easing, it also exerts the greatest influence on the long end. The Feds have stated very clearly that the ending of QE depends on two variables, inflation and unemployment rate. With unemployment rates still high and inflation under control, the foundation of the bull market remains intact.