How about the bad news first? — The Consumer Price Index hit its highest annual rate since 1981 and its biggest monthly increase since September 2005. And yet bond yields fell, signaling that investors weren't alarmed. Why? There was some (potential) good news hidden in the inflation numbers, if you filter out food and energy. So-called core CPI grew at a slower pace than the past few months, a welcome indication that upward pressures on prices could be easing. Our Ben White writes: "Consumer prices have soared to their highest level in four decades, but if some of the world's largest banks are calling it right, the inflation fever that has gripped the country could be breaking. In recent days, economic forecasters at Deutsche Bank, UBS and Bank of America, among others, have said that the March inflation number — an 8.5 percent surge over last year — may be the worst of it. … "Among the banks' reasons for optimism: Used car prices, which propelled much of the inflation last year, have begun to fall. Supply chain snags should finally fade as the post-Covid economy develops, they say. And the Federal Reserve is poised to aggressively tackle the issue by jacking up interest rates in the coming months." Federal Reserve Governor Lael Brainard (who later this month should become Vice Chair Lael Brainard) also called the slowdown "notable." "Core inflation is the component of inflation that most closely reflects the strength of domestic demand and I'm most focused on for purposes of assessing the appropriate path of monetary policy," Brainard said at the Wall Street Journal's Jobs Summit. "I wouldn't take a lot of signal from any one month of data. But I will be watching carefully for a continuation of this kind of pattern," she added. "As we've said, inflation is too high, and getting inflation down is going to be our most important task." In a forecast released Tuesday, Peterson Institute economists said they're expecting the Fed to have to move aggressively to tame inflation. " While it is difficult to know how these forces will add up over the rest of 2022 and 2023, the lack of a material moderation in incoming inflation data so far suggests that high inflation will persist without significant Federal Reserve action," nonresident senior fellow Karen Dynan wrote in a blog post. "In the absence of a material tightening of financial conditions from exogenous forces, the Fed will need to raise interest rates aggressively to subdue inflation in the next couple of years," added Dynan, who has previously worked at Treasury, the Fed and the White House. "Accordingly, the federal funds rate is likely to rise to more than 4 percent by 2023." Partisanship in economic polling — Turns out feelings about President Joe Biden's handling of the economy might not just be about the economy. A new POLITICO/Morning Consult poll asked one set of respondents who should be credited for the current labor market. In response, 41 percent said Biden, 14 percent said Donald Trump, 9 percent said Congress, 6 percent said their governor and 15 percent said "other." The same question was then asked to another set of respondents who were told that 431,000 jobs were added in March 2022 and the unemployment rate had reached a new low. This time, only 33 percent of respondents pointed to Biden as a reason for the booming labor market, because fewer Republicans credited him. On the other hand, Biden was blamed for the cost of goods and services at about the same rate with more detail vs. less (41 percent vs. 42 percent). Rick Scott definitely sees the opening. The Florida senator, who as chair of the National Republican Senatorial Committee is leading the charge to flip the upper chamber, told POLITICO in an interview that the Biden administration should be doing more to curb inflation — in particular, oil prices. Scott's remedies: fewer regulations to deal with the supply chain crisis and more permits for oil drilling. And reducing congressional spending. "It's an unbelievable tax on the poorest families," he said of inflation. "This has got to get under control, and the way you get under control is to live within your means." Scott acknowledged that Russia's invasion of Ukraine had made the problem worse, but put the "lion's share" of the blame on the Biden administration. For Florida, he said he worried about increasing mortgage rates that would make it more expensive to buy a home and inflation that might mean "tourists will not have discretionary dollars." IT'S ONLY WEDNESDAY? — I mean, ahem, happy Wednesday! Keep sending tips to me at vguida@politico.com or @vtg2, and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver.
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