WASHINGTON (MarketWatch) — Inflation may be red hot right now, but the Federal Reserve is cool as a cucumber. Despite another 0.5% jump in consumer prices in March, the Fed isn’t ready to put the brakes on the economy. Key Fed officials have made it clear that they won’t react to momentary blips in prices, even for such crucial items as gasoline and food. Their view is that higher energy prices are slowing the economy enough by themselves, thank you very much, without the Fed having to raise rates or call a sudden halt to its quantitative easing program. While the 0.5% increase in consumer prices may be getting all the attention this morning, there’s one other number from this morning’s report that shouldn’t be ignored: The average hourly wage of U.S. workers fell by 0.6% in inflation-adjusted terms in March. Real average hourly wages have fallen 1% over the past year. Prices may be rising, but wages aren’t keeping pace. And that means inflation — as painful as it is — can’t imbed itself into the economy. Consumers simply don’t have the purchasing power.

* THOMSON REUTERS/U. OF MICH US CONSUMER SENTIMENT PRELIMINARY APRIL INDEX 69.6 (CONSENSUS 68.5) VS FINAL MARCH 67.5 * THOMSON REUTERS/U. OF MICH CURRENT CONDITIONS INDEX PRELIM APRIIL 82.7 (CONSENSUS 82.0) VS FINAL MARCH 82.5 * THOMSON REUTERS/U. OF MICH CONSUMER EXPECTATIONS INDEX PRELIM APRIL 61.2 (CONSENSUS 58.5) VS FINAL MARCH 57.9 * THOMSON REUTERS/U. OF MICH 12-MONTH ECONOMIC OUTLOOK INDEX PRELIMINARY APRIL 75 VS FINAL MARCH 60 * THOMSON REUTERS/U. OF MICH 1-YEAR INFLATION OUTLOOK PRELIM APRIL 4.6 PCT VS FINAL MARCH 4.6 PCT * THOMSON REUTERS/U. OF MICH 5-YEAR INFLATION OUTLOOK PRELIM APRIL 2.9 PCT VS FINAL MARCH 3.2 PCT

Minutes before the stock markets open, futures prices moved just over yesterday's highs. Despite this, TSY yields are lower, with 10yr notes at 3.425 after bouncing twice earlier on the 3.42 resistance level. MBS however, are moderately better than their best levels yesterday, up 13 ticks now at 101-24. Consumer Sentiment is the last economic data of the morning, coming up at 9:55am. Until/unless 10yr notes break below 3.42 with volume, after Sentiment data, we're simply in a range trade within expected technical resistance. Even so, the gains seen so far this morning will have a significantly positive impact on the first rate sheets.

* U.S. MARCH INDUSTRIAL OUTPUT +0.8 PCT (CONSENSUS +0.5 PCT) VS FEB +0.1 PCT (PREV UNCH) * U.S. MARCH CAPACITY USE RATE 77.4 PCT (CONS 77.3 PCT) VS FEB 76.9 PCT (PREV 77.0 PCT) * U.S. MARCH MANUFACTURING OUTPUT +0.7 PCT VS FEB +0.6 PCT, CAP USE 75.3 PCT VS FEB 74.9 PCT * U.S. MARCH MINING OUTPUT +0.6 PCT (FEB +0.3 PCT), UTILITIES OUTPUT +1.7 PCT (FEB -3.6 PCT) * U.S. MARCH INDUSTRIAL OUTPUT EX CARS/PARTS +0.7 VS FEB -0.1 PCT * U.S. MARCH MOTOR VEHICLE ASSEMBLY RATE ROSE TO 8.94 MLN UNITS/YR FROM FEB 8.55 MLN * U.S. Q1 INDUSTRIAL OUTPUT +6.0 PCT VS Q4 +3.2 PCT, CAP USE 77.1 PCT (Q4 76.1) * U.S. MARCH CAPACITY USE RATE HIGHEST SINCE 77.6 IN AUGUST 2008

* U.S. FEBRUARY NET OVERALL CAPITAL INFLOW $97.7 BLN VS REVISED $30.6 BLN INFLOW IN JANUARY * U.S.FEBRUARY NET LONG-TERM INFLOW (EX-SWAPS/OTHER) $26.9 BLN VS REV $51.1 BLN INFLOW IN JANUARY * U.S. FEBRUARY NET LONG-TERM INFLOW (INCL. SWAPS/OTHER) $16.2 BLN VS REV $31.6 BLN INFLOW IN JANUARY * FEBRUARY NET FOREIGN PURCHASES OF US TREASURY BONDS, NOTES $30.6 BLN VS $46.5 BLN PURCHASES IN JANUARY * U.S. FEBRUARY NET OFFICIAL CAPITAL INFLOW $5.1 BILLION VS REVISED $19.5 BLN OUTFLOW IN JANUARY * U.S. FEBRUARY NET PRIVATE CAPITAL INFLOW $92.6 BLN VS (REVISED) $50.1 BLN INFLOW IN JANUARY * CHINA U.S. TREASURY SECURITIES HOLDINGS $1.1541 TRLN IN FEBRUARY VS $1.1547 TRLN IN JANUARY

(TheStreet) -- Bank of America(BAC_) lackluster first quarter earnings performance can be summed up in two words: mortgages fallout. The bank reported first quarter earnings of $2 billion, or 17 cents a share, missing Thompson Reuters analysts estimates of 27 cents a share. Results were weighed down by a $38.5 billion settlement the bank reached with monoline insurer Assured Guaranty(AGO_) that resolves its outstanding and potential repurchase claims against BofA. The agreement includes a cash payment of $1.1 billion to Assured Guaranty, and a loss-sharing reinsurance arrangement that has an expected value of approximately $470 million. "This agreement is an important step towards resolving non-Government Sponsored Enterprise legacy issues on terms beneficial to our company," said Terry Laughlin, legacy asset servicing executive in a statement issued Friday. Separately, Bank of America reported a net loss of $2.4 billion in consumer real estate services compared, to a net loss of $2.1 billion for the first quarter in 2010. Revenue declined by $1.4 billion, and noninterest expense increased by $1.6 billion from the year-ago quarter. Bank of America reported that factors in the decline in mortgage banking income include a $487 million increase in the representations and warranties provision, a $534 million decrease in service charge income from overdraft policy changes, a decline of $943 million from fair value adjustments related to structured liabilities and tighter credit spreads. While provisions for credit losses decreased to $1.1 billion from $3.6 billion in the year-ago quarter from improving delinquencies and lower net charge offs, fewer home sales and more legal issues plagued the balance sheet.

After the release of March CPI, which showed consumer-level inflation mostly in line with expectations, Treasury yields dropped and MBS prices rose, both to EXACTLY the same levels as yesterday's best. For 10yr yields, that's a split second hitting 3.423 and in FNCL 4.5 MBS, 101-21. While MBS are holding those levels, 10yr yields are backed up to 3.4396. S&P futures dropped as well, moving from around 1310 to 1306, before moderating back to 1309. Overall, these moves put a slightly bond-bullish slant this morning on the time between now and the next two economic data: Industrial Production and Consumer Sentiment. 3.42 is critical resistance in benchmark 10's.

* U.S. MARCH CPI +0.5 PCT (+0.5489; CONSENSUS +0.5 PCT), EXFOOD/ENERGY +0.1 PCT (+0.1354; CONS +0.2 PCT) * U.S. MARCH CPI YEAR-OVER-YEAR +2.7 PCT (CONS +2.6 PCT), EXFOOD/ENERGY +1.2 PCT (CONS +1.2 PCT) * U.S. MARCH UNADJUSTED CPI INDEX 223.467 (CONS 223.25) VS FEB 221.309 * U.S. MARCH CPI ENERGY +3.5 PCT, GASOLINE +5.6 PCT, NEW VEHICLES +0.7 PCT * U.S. MARCH CPI FOOD +0.8 PCT, HOUSING +0.1 PCT, OWNERS' EQUIVALENT RENT OF PRIMARY RESIDENCE +0.1 PCT * U.S. MARCH CORE CPI SEASONALLY ADJUSTED INDEX 223.331 VS FEB 223.029 * U.S. MARCH REAL EARNINGS ALL PRIVATE WORKERS -0.5 PCT VS FEB -0.2 PCT (PREV -0.5 PCT) * U.S. MARCH CPI FOOD RISE LARGEST SINCE JULY 2008 (+1.0 PCT)

* NY FED'S EMPIRE STATE INDEX 21.70 IN APRIL (CONSENSUS 16.90) VS 17.50 IN MARCH * NY FED'S EMPIRE STATE EMPLOYMENT INDEX AT 23.08 IN APRIL VS 9.09 IN MARCH * NY FED'S EMPIRE STATE NEW ORDERS INDEX 22.34 IN APRIL VS 5.81 IN MARCH * NY FED'S EMPIRE STATE PRICES PAID INDEX 57.69 IN APRIL VS 53.25 IN MARCH * NY FED'S EMPIRE STATE SIX-MONTH BUSINESS CONDITIONS INDEX 47.44 IN APRIL VS 49.35 IN MARCH * EMPIRE STATE BUSINESS CONDITIONS INDEX AND NEW ORDERS INDEX BOTH AT HIGHEST SINCE APRIL 2010 * NY FED'S EMPIRE STATE EMPLOYMENT INDEX AT HIGHEST SINCE MAY 2004 * NY FED'S EMPIRE STATE PRICES PAID INDEX AT HIGHEST SINCE AUG 2008