US inflation up 3.2% in February, no change in Fed’s stance

Washington: The US consumer price index increased 3.2 percent in February from a year ago. The consumer price index was in line with expectations of 3.1 percent. The consumer price index increased 0.4 percent from the previous month, reported the Labor Department.

Core CPI, which excludes food and energy prices, increased 0.4 percent from the last month and 3.8 percent from a year ago, reports Moneycontrol.

The increase in US CPI numbers would not change the Fed’s decision of a rate cut in June, say experts

The US CPI numbers may not change the Fed’s decision of a rate cut soon because it does not look at CPI numbers in isolation, said Vikas Gupta from OmiScience Capital. He said that the Fed officially follows the PCE index. “Plus the increase in core inflation was because of an increase in shelter cost. Even though shelter costs are increasing in the US, other data points suggest that rental costs are actually dropping,” said Gupta.

The Fed would officially follow the PCE numbers and not the CPI numbers alone. The increase in core inflation is primarily because of an increase in shelter cost. However rental rates in US are dropping, so

“With US CPI coming in along expected lines, there would be no negative impact on the Indian markets tomorrow,” said Pranab Uniyal, of HDFC Securities.

Last week, comments from Fed Chair Jerome Powell set expectations that rate cuts will begin this summer. The Fed chair said that inflation had “eased substantially” since hitting 40-year highs in 2022, and said there were risks of both cutting rates too soon and allowing inflation to reaccelerate.

He further said that there are risks of keeping monetary policy too tight for too long and damaging an ongoing economic expansion that has sustained a below four per cent unemployment rate for two years.

Image courtesy of wealthway

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