Inflation jumps in March. What does it mean for your investments?


Stocks, Bonds

By Gerald Wong, CFA • 10 Apr 2024 • 0 min read

The US consumer price index (CPI) rose more than expected in March. We find out what this may mean for your fixed deposit, T-bill and stock investments.

us cpi consumer price index march 2024

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What happened?

Like many others, I was awaiting the latest US inflation data to get an indication of the Fed’s interest rate direction.

The US Consumer Price Index (CPI) rose by 3.5% compared to the previous year, exceeding forecasts by economists.

With inflation remaining sticky, many of you might be wondering if we might still see a fall in interest rates in the coming months. 

After all, we have already seen a decline in the interest rates on fixed deposits, and the interest rates on savings accounts are being cut too

What does the latest inflation data tell us about where interest rates are headed? Let us look at a few indicators to find out. 

us cpi consumer price index march 2024
Source: Trading Economics

What the latest CPI data may mean for interest rates and your investments

#1 – Fed forecasts three rate cuts in 2024

According to Fed’s latest interest rate projection in March 2024, we might see three rate cuts this year. 

This will bring the potential rate cuts this year to 75 basis points (or 0.75%) in total. 

In 2025, the median fed funds rate projection is 3.9%, which implies another 75 basis points (0.75%) cut. 

Source: US Federal Reserve

While much attention is always given to the Fed’s interest rate projections, historical instances have shown it can be spectacularly wrong.

For example, the December 2021 projection guided for a 0.75-1 % target range for the fed fund rate but ended with the rate soaring to 4.25-4.5%. 

Source: US Federal Reserve

#2 - Investors have moderated their expectations of rate cuts

Following the stronger than expected inflation data, investors are now expecting that the Fed will slow down on its pace of interest rate cuts. 

According to the CME FedWatch Tool, markets are now expecting just two rate cuts in 2024, down from three previously.

Source: CME Fedwatch Tool

In fact, investors are now effectively assigning close to a 80% probability that the Fed will keep interest rates unchanged in June, an increase from 42% before the latest inflation data. 

The timing of the first rate cut is now expected in September, a three month delay from the previous expectation for the first rate cut to come through in June.

This is definitely a sharp contrast to the expectation at the start of 2024, when markets were expecting that we would see seven rate cuts this year. 

Source: CME Fedwatch Tool

Recently, Fed Chairman Jerome Powell has said that noted that interest rates will only be cut when officials have greater confidence that inflation is moving sustainably down.

This is consistent with what some other Fed officials have said that while the US is within ‘striking distance’ of its 2 per cent inflation target, they would take their time before cutting rates. 

#3 – Other central banks that have cut rates may also provide some direction

The term “Hikelandia” coined by the Economist magazine, refers to a cohort of eight countries (Brazil, Chile, Hungary, New Zealand, Norway, Peru, Poland and South Korea) that implemented proactive  tightening monetary policy in 2021. 

Distinctively, these countries opted to raise rates much earlier than their US and Europe counterparts at a time when rising inflation was still perceived as being transitory.

The emphasis on these countries is to illustrate a consequential pattern: as central banks undertake tightening measures, inflation tends to decrease, creating conditions conducive to subsequent rate cuts. 

Remarkably, among the eight nations that initiated tightening ahead of the United States and Europe, seven experienced substantial declines in their inflation rates. 

The major revelation here is that five of these countries executed rate cuts even before inflation fell below their respective inflation targets. 

Beyond Hikelandia, two other countries have also cut rates : the Czech Republic and Colombia. 

In essence, these countries are now like the “canary in the mine”. An upswing in inflation in these countries in the coming months would imply they have eased too early.

Conversely, a further decline in their inflation rates could prompt other countries to follow suit. 

Source: US Federal Reserve, Central Bank data

What would Beansprout do?

The latest inflation data has raised uncertainty on the timing of interest rate cuts once again. 

With inflation remaining sticky, the Fed is unlikely to risk its credibility by declaring victory over inflation and cut rates too early only to subsequently raise rates again.

Hence, it was not a surprise to see a jump in bond yields, with the US 10-year government bond yield rising to 4.5%.

Source: Tradingview


For investors who would like to lock-in interest rates, the latest Singapore Savings Bond offers a 10-year average return of 3.06% per annum.

With the jump in government bond yields, the 10-year average return for the next SSB may rise to 3.24% based on our projections as of 10 April 2024.

Source: Beansprout SSB interest rate projection as of 10 June 2024


With rising expectations that first Fed will likely delay its first rate cut, the Singapore T-bill yield may remain supported in the coming months. 

Already, we have seen that the T-bill yield is higher than the best fixed deposit rate in Singapore and most savings accounts that do not require jumping through hoops

Likewise, the yield on cash management accounts may also remain elevated in the near term. 


The moderation in rate cuts expectations for this year may dampen sentiment towards US stocks, especially after the S&P 500 index reached a record high level of above 5,200 level recently. 

Likewise, Singapore REITs may come under pressure with renewed concerns on their financing costs. As such, we would remain selective on REITs, focusing on REITs that were still able to raise their dividends despite sector headwinds. 

We will also be looking out for what Fed officials have to say in the coming days to get an indication of how the latest inflation data may have changed their views about cutting interest rates in the months ahead. 

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

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