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February's Core Inflation Index Slightly Surpasses Expectations

 
 
 
 

February consumer price index increased by 0.4%, which was anticipated, resulting in the US's inflation rate standing at 6.0% over the last 12 months. The core index, which excludes energy and food, also rose by 0.5%, surpassing the projected 0.4% increase, causing the inflation rate for the core index to reach 5.5% in the past year.

 

Although Fed Chairman Jerome Powell suggested in his recent speech that interest rates may need to be raised due to sticky inflation, the latest inflation data shows a continuing trend towards moderation, compared to January's annual rate of 6.4%. Furthermore, the collapse of SVB Bank and concerns about its potential impact on other banks have led Goldman Sachs to predict that the Fed will not increase interest rates at the upcoming meeting on Wednesday.

 

Interest Rate Strategy Backfires: Widening Cracks in Market

 

The market's fear that persistent interest rate hikes would exacerbate existing issues led to pricing of interest rate cuts. It's plausible that the strategy of rapidly increasing interest rates and subsequently slowing down has now reached the deceleration phase. This approach may have caused the cracks to widen and potentially fragment.

 

Upon examining the index components, it appears that the upward trend in services inflation persists, contributing +0.36% to the core index's rise. Although rental prices have sharply increased in the previous month, Bloomberg's analysis shows that the core inflation rate for services, excluding rents, which is a crucial metric for the Fed, increased by 0.43% in February. Conversely, commodity inflation did not contribute to the index's rise in February.

 

Yesterday's published data indicates a considerable decrease in the public's inflation expectations for the upcoming year, from 5.0% to 4.2%, which may suggest a potential decline in price pressures from that front. However, the Fed will need to weigh the significance of these events against inflation, which is pulling in a different direction.

 

February Employment Report Prompts Caution Ahead of Interest Rate Decision

 

It's worth recalling that the employment report for February, which was released a few days ago and almost overlooked amidst recent events, was robust and even prompted a call for further monetary restraint. The decision regarding interest rates will be made next Wednesday. Although inflation did remain high, it was not a negative surprise, which may provide the Fed with the option of choosing a more modest approach by raising interest rates by only 1/4 percent. While it's unlikely that interest rates will remain unchanged, the possibility cannot be completely ruled out.

 
 
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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

 
 
 
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Disclaimer: The Score performance whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The Readiness Indicators, Sentiment Indicators and total score are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Active trading is generally not appropriate for someone of limited resources, limited invesment or trading experience, or low-risk tolerance. Your capital may be at risk.

Please note that no offer or solicitation to buy or sell securities, securities derivatives of future products of any kind, or any type of trading or invesment advise, recommendation or strategy, is made, given or endorsed by StocksRunner including any of their affiliates ("TS").

This information is provided for illustrative purposes only. You should not rely on any advice and/or information contained in this website and before making any investment decision. we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.