Week Ending March 18 Financial Markets Update

The Fed raised rates last week by a quarter-percentage-point, as expected, for the first time since 2018 and signaled rate hikes at all six of its remaining meetings this year. Treasury yields, particularly those with shorter maturities, moved higher with the Fed being seen as more hawkish than expected. Inflation data released before the meeting showed the Producer Price Index increased 10% over the last year through February. Most of the increase came from an increase in energy prices. January’s increase was also revised up to 10%, which is the highest increase on record back to 2010. Retail sales grew 0.3% in February over the prior month, slowing from January’s strong increase of 4.9%. Nonetheless, retail sales are up 16% compared to last year, excluding gas stations, suggesting consumers are still on a strong footing.