The verdict is in: February’s US inflation data surprised the market. The latest US Consumer Price Index (CPI) report for February 2024 has taken markets and investors by surprise, revealing an unexpected increase in the annual inflation rate to 3.2%, surpassing both forecasts and January’s figure of 3.1%. This throws a curveball at hopes for a rapid Federal Reserve interest rate cut.
Core inflation, excluding food and energy, also came in slightly higher than expected at 3.8%. While a touch better than January, it remains well above the Fed’s desired 2% target. Rising shelter costs were a significant contributor to the overall increase.
The Fed is in a sticky situation. Their primary goal is to tame inflation, and these numbers suggest they might delay interest rate cuts. Investors hoping for a swift policy change are likely disappointed, with stock futures initially reflecting some jitters. However, the broader market seems unfazed, with S&P 500 and Nasdaq 100 futures even trending upwards. The bond market, however, remained subdued initially.
There’s a potential silver lining: a slight uptick in the unemployment rate hints at a possible economic slowdown, which could cool inflation.
The February CPI report is a mixed bag. Inflation remains stubbornly high, but signs of an economic slowdown could ease price pressures in the future. Analysts caution that sustained evidence of declining inflation is needed before the Fed alters its stance. This data adds complexity to the economic narrative, highlighting the challenge of achieving the Fed’s inflation goals. The coming months will be crucial, with the Fed closely monitoring economic indicators to determine the fate of interest rates.
Sources: Trading Economics, Bureau of Labor Statistics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
