Inter-annual inflation in the United States rose to 3.2% in February and the possibility of interest rate cuts averted

A customer buys food in a supermarket in Washington (USA). EFE/EPA/Michael Reynolds

The United States Consumer Price Index (CPI) rose 3.2% in February on an annual basis, Whereas compared to last month it increased by 0.4%Above analysts’ expectations and well above the 2% objective set by the Federal Reserve (Fed).

Most of the increase, 60%, was due to increases in housing and gasoline prices, and the energy price index rose 2.3% compared to January, while food prices declined. remained almost unchangedAs reported by the Bureau of Labor Statistics (BLS).

The second consecutive month of stronger-than-expected inflation has effectively closed the door on the possibility of a Federal Reserve interest rate cut before June, and some traders and analysts are betting that central bankers will wait even longer. may have to.

The underlying price index, excluding food and gasoline, rose 0.4% in February compared with January, the same pace as the previous month.

Other items that recorded growth in February included air tickets, auto insurance, clothing and entertainmentWhile personal care items and furniture were on downgrade.

Core year-on-year inflation, which does not include food or energy prices due to their volatility, was 3.8%.While energy prices decreased by 1.9% year-on-year and food prices increased by 2.2%.

Inflation data was received with caution in the market open, but in the mid-session, the S&P 500 index and the technical Nasdaq index turned in positive numbers.

A person shops at a Kohl’s store in Clifton, New Jersey. (AP Photo/Seth Wenig)

“It is clear that inflation data like January and February will not allow the Fed to lower rates quickly”Robert Frick, an analyst at Navy Federal Credit Union, said in a statement.

In the opinion of Ben Laidler, global market strategist at the eToro investment and trading platform, the market has already factored the inflation data into its calculations and now the question is whether the inflation data will be maintained when the Fed meets next week. Will go. It is expected that the first rate cut will take place in June.

“Inflation tipping points have already risen, and investors are expecting a rotation as we get closer to rate cuts”Laidler said.

The year-on-year increase is one-tenth higher than the 3.1% rise in CPI in January, and reflects a steady rise in prices and above the Fed’s objectives, which it expects to be able to lower rates this year. He continues to find his great pending task in inflation to be able to do this.

Interest rates have remained between 5.25 and 5.5% since last summerThat follows dozens of hikes starting in March 2022.

Unemployment and consumer confidence remain solid, but raising prices remains a pending task, although US issuing banks are expected to start making moderate rate cuts in June, while markets have already ruled out a rate cut in May. are doing.

Fed policymakers will meet next week and are expected to leave the policy rate at the current range of 5.25%-5.5%, where it has been since last July.

Until recently there was speculation that a rate cut could be made at the next meeting on April 30-May 1 if inflation, which fell sharply last year and then jumped in January, returned toward the April 2 target. Can. ,

But Tuesday’s inflation report is “an ugly report that will do nothing to calm the Fed’s nerves,” a Fed economist wrote. BMO Scott Anderson. “Clearly, restrictive monetary policy has not yet fully done its job and a federal Reserve To get the full effect of monetary medicine, one has to be patient and a little aggressive.

Washington, US Reuters/Leah Millis/File photo The Federal Reserve Board building on Constitution Avenue.

Core inflation in services excluding rents, a measure that Federal Reserve Chairman Jerome Powell has said he pays close attention to, rose 0.5% in February from the previous month, and the lowest in the three most recent months on an annual basis. It grew at 6.8%, compared to 6.7% in January.

Nationwide’s Kathy Bostjancic said these very high readings will increase the Fed’s caution about the inflation outlook.

Traders of futures contracts tracking the Fed’s policy rate price have a less than 1 in 10 chance of a rate cut in May, but about 70% would see a cut by June.

After the inflation data, they slightly lowered their outlook for how much the Fed will cut rates by the end of the year, though they generally still expect the central bank to make four quarter-point cuts from June to December. Will do.

(With information from EFE and Reuters)

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