US inflation dips slowly, prompting the Fed to wait for clearer signs before cutting rates
The US is witnessing a slow retreat in inflation, with the core consumer price index (CPI) anticipated to have risen by 0.3 percent in February, following a 0.4 percent increase at the start of the year, as reported by BNN Bloomberg.
This measure, which excludes food and fuel to present a clearer picture of underlying inflation, reflects a cautious but consistent approach to inflation management.
The Labor Department's upcoming CPI report is expected to reveal a 3.7 percent increase from the previous year, marking the smallest annual advance since April 2021. Despite the decrease from the peak of 6.6 percent reached in 2022, the recent pace indicates modest progress.
Fed chair Jerome Powell, reflecting on the situation during congressional testimony, stated that while rate cuts may be appropriate “at some point this year,” the Federal Reserve requires more evidence that inflation is approaching their 2 percent target.
This stance aligns with the Fed's broader strategy of ensuring that inflationary pressures are thoroughly contained before making significant policy shifts.
The personal consumption expenditures price index, another critical inflation gauge, alongside the producer price index, will offer additional insights into inflation trends ahead of the Fed's March 19-20 policy meeting.
The economy shows few signs of distress beyond inflation, with employment growth moderating yet remaining robust enough to support consumer spending.
A forecasted 0.8 percent increase in February retail sales suggests a rebound in consumer activity, possibly reflecting a resurgence of shopping post the holiday season.
Looking globally, wage negotiations in Japan and inflation updates from Sweden to Brazil are set to keep investors attuned to the worldwide economic pulse.
In the UK, upcoming wage data and the Bank of England's survey on consumer inflation expectations are particularly noteworthy, signaling ongoing concerns about inflationary pressures and their impact on monetary policy.
Bloomberg Economics analysts, including Anna Wong and Stuart Paul, express skepticism about February's CPI report providing the clarity Powell seeks for a dovish shift. They anticipate the seasonal trends driving core CPI to persist, projecting a narrow escape between May or June for the Fed's first rate cut.
