E-Paper
US inflation unexpectedly rises to 3.2%, dampening hopes of Fed's interest rate cuts in March
US consumer prices witnessed a surge in monthly and annual rates in February, as per the inflation figures issued by the Labor Department on Tuesday.
US consumer prices witnessed a surge in monthly and annual rates in February, as per the inflation figures issued by the Labour Department on Tuesday.
The consumer price index (CPI), a frequently followed inflation indicator, climbed 3.2 percent annually in February and 0.4 percent last month alone. Annual inflation has risen marginally from 3.1% in January.
This represents a departure from the previous declining trend, since the current inflation rate exceeds the 3.1 percent recorded in January but lower than the 3.4% reported in December.
Despite this, the Federal Reserve (Fed) still has to work toward its 2% target rate.
Also Read: US Fed Reserve keeps interest rates unchanged for fourth time in a row
The Fed has been addressing excessive inflation with vigorous policy tightening, hiking interest rates sharply to reduce demand and stabilise prices.
Since March 2022, the Fed has progressively raised interest rates through periodic adjustments, bringing the standard federal fund rate to its desired range of 5 to 5.25 percent.
It seems that investors will keenly examine stock and cryptocurrency market moves in response to the CPI data. The rise in inflation corresponds with a surge in the cryptocurrency market following the introduction of an exchange-traded Bitcoin ETF in the United States.
Feds to begin rate cuts in June, a new poll reveals
The US Federal Reserve will lower its benchmark interest rate in June, as the central bank awaits further data to clarify whether inflation is on track to meet its 2% objective, Reuters reported.
In its latest survey, Reuters revealed that respondents believed it was more likely that if Fed policymakers changed their rate estimates at upcoming March 19-20 meeting, the median view would indicate fewer cuts this year.
Also Read: Fed Is ‘Not Far’ From Confidence Needed to Cut Rates, Powell Says
Fed Chair Jerome Powell emphasized in his last statement to Congress that policy easing will be "appropriate" at some time this year, stressing that persistent inflation and a strong labour market may hinder an early rate decrease.
Around 108 economists participated in the poll conducted between March 5 and11. They all projected the fed funds rate will remain in the 5.25%-5.50% range next week. However, 72 of them stated the first rate decrease would occur in June, 17 predicted cuts in May and 19 others claimed in July or later.
Michael Gapen, a chief US economist working at Bank of America, told Reuters: "The Fed is seeking 'greater confidence' on inflation before it starts normalizing its policy stance. We expect progress on inflation in coming months will give the Fed enough confidence to begin a gradual cutting cycle in June."
