- The latest Consumer Price Index (CPI) data shows a 3.2% spike in US inflation.
- The numbers were higher than expected after January’s 3.1%.
- The failure to get closer to the targeted 2% could further delay rate cuts to June.
US Inflation in February 2024
All glimmer of hope for incoming rate cuts was quashed once more as the recent CPI report of the Bureau of Labor and Statistics (BLS) showed an increase in year-over-year US inflation numbers from January’s 3.1% to February’s 3.2%. This pushed the figures further away from the Federal Reserve’s 2% target, which could serve as its basis for a rate cut.
However, Sung Won Sohn, a chief economist at the Loyola Marymount University, believes the Fed may have made a good call to postpone any talks of a rate cut.
“Inflation is like a bobsled track, it slopes down with many twists and turns,” he said. “The uptick in the inflation rate supports the Federal Reserve’s ‘go-slow’ approach in cutting the interest rate.”
Driving up US inflation in February were the steep climb of prices on the gas pump and rising shelter costs. The two accounted for around 60% of the monthly upsurge in the BLS data.
Taking away the volatile prices of food and energy ramps up the score to 3.8%. But if there’s any consolation, that’s a 0.1% slowdown from January’s 3.9% using the same metrics. Likewise, grocery prices almost remained the same as the increase in costs of eggs, bread, and cereals was somehow offset by the decline in the price tag of meat and fresh fruit products.
When is the Rate Cut?
At this point, a March rate cut is very unlikely. Now, analysts are eyeing June if the March data shows some progress.
“This print is just about enough to keep rate cut expectations for June stable – but another print like this next month would push the first cut into the second half of the year, putting the soft landing narrative in question,” Principal Asset Management Chief Global Strategist Seema Shah commented.
How are the Stock and Crypto Markets Reacting?
Upon release of the report, some investments in certain sectors of the market that exhibited a cooldown in the US inflation data saw a little uptick in prices. The Dow Jones index immediately welcomed the developments in some areas with a 0.3% at the start of trading on Tuesday. Meanwhile, the S&P 500 displayed a 0.5% gain while Nasdaq got 0.6% within the same period.
Bitcoin (BTC), on the other hand, slumped all the way to $68,728.85 following the CPI report but it has since recovered to the $71K range as of Tuesday afternoon in the US.