Oleg Kalmanovich The core US consumer price index (CPI Core), which excludes food and energy, maintained its growth rate at 0.4% in February versus an expected 0.3%.
For the second month in a row, levels remained the highest since April 2023. The annual pace slowed to 3.8%, also higher than the 3.7% expected.
Growth in the CPI itself accelerated to 3.2% from 3.1%, while consensus expected the same pace to continue.
In its monetary policy, the Fed tends to focus on core inflation, although it uses a slightly different indicator - PCE Price Core.
The persistence of elevated growth rates suggests that the Fed may be more restrained in its desire to move to lower interest rates, but they are unlikely to go higher.
Reaction: Treasuries fluctuated in the wake of the report, with yields turning higher as traders digested the figures. Two-year yields were up about 3 basis points at 4.57% as of 9:26 a.m., while futures on the S&P 500 Index were up 0.4%.
Conclusion: Since consumer prices did not continue to fall in February, Fed members' dot plot forecasts for the trajectory of rates during the March 20 meeting may now become hawkish, with less decline in bank interest this year. This could give US bulls a new dose of enthusiasm and potentially end the current strengthening of risks!
