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Please see below article received from EPIC Investment Partners this morning, which reports on the latest economic data from the US.

The Fed’s preferred inflation gauge, the personal consumption expenditure deflator (PCE) was broadly in-line with expectations in February, increasing 0.3%mom, slightly ahead of December’s 0.2% print. On an annual basis, PCE was 2.4%, in-line with expectations and 0.2% below the previous reading.  

The core print was along the same lines, coming in 0.4%mom, versus a prior of 0.2%, while the annual value ticked down a tenth to 2.8%, mainly due to base effects. Both the numbers were in-line with market expectations.   

Stronger data, including inflation, has very much been the theme so far this year. However, the Fed along with the market will be looking to see if this has been a “fluke”, or a new trend. Fed speakers Bostic, Goolsbee, and Daly all seemingly unperturbed and continued to tow the party line.  

Goolsbee said we shouldn’t extrapolate one month’s data, Bostic said it shows that the path to target inflation will have bumps along the way, and the dovish Daly repeated that she advocates for policy rate cuts ahead of reaching the 2% target. Additionally, the historically more hawkish Mester reiterated William’s message yesterday, stating that three cuts for 2024 “still sounds about right”.   

Meanwhile, New York Community Bancorp (NYCB) was again in the headlines yesterday after they released several announcements that spooked the market, who were already on edge since the lender reported its exposure to commercial real estate (CRE).  

Regulatory filings from its management “identified material weaknesses in the Company’s internal controls related to internal loan review.” The bank attributed the problems to “ineffective oversight, risk assessment and monitoring activities”.  

The news reignited the controversy that began in January when the company, a significant lender for New York apartments and CRE, announced it was amassing cash to safeguard against possible loan issues. The stock fell over 26% in after-hours trading, on top of the more than 53% it has already lost this year.  

As we have said before, US banks alone hold about USD2.7tn in commercial real estate debt, of which a significant percentage is now underwater.  

We reiterate, this could be a canary in the coal mine that we will be keeping a very close eye on. 

Please check in again with us soon for further relevant content and market news.