With inflation a hot topic of late over the last year or so and the U.S. Federal Reserve seemingly hiking rates through the roof, market participants will be hoping for a continued downtrend in price levels to pave the path for the FED to ease rate hikes come future announcements.
Last time out, the FED increased its benchmark rate by 25 basis points to mark the eighth consecutive rate hike since last year in a concerted effort to tame soaring price levels and avoid a potential inflationary spiral. While market participants await the much-anticipated inflation data for February, consensus estimates point to a 0.4% month-on-month increase in headline inflation, while analysts at Dow Jones and Deutsche Bank forecast a 6% year-on-year increase. Leading up to the data release, U.S. Futures are up marginally while Treasuries fall as market participants price in expectations for the FED to ease rate hikes. Moreover, the collapse of California-based lender Silicon Valley Bank has strengthened the case for rate caution. Still, market participants will know that “the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.”
With “all eyes on February’s CPI report,” the annual U.S. CPI figure meets expectations at 6% for February, down from January’s annual figure of 6.4%. Seasonally adjusted, the U.S. Consumer Price Index (CPI-U) for All Urban Consumers rose 0.4% in February after increasing 0.5% in January. As per the U.S. Bureau of Labour Statistics, “the index for shelter was the largest contributor to the monthly all items increase, accounting for over 70% of the increase.” While the food index increased by 0.4% in February, the energy index declined by 0.6% after rising by 2% in January. Market participants will be relieved to see February’s CPI figure come in lower than January’s annual figure and in line with expectations. Despite U.S. CPI easing from January to February, the data still indicates an elevated inflation rate that may pose concerns over whether a soft landing is still possible. As market participants digest the data, all eyes will turn to the FED’s following interest rate announcement to gauge how Jerome Powell plans to bring inflation down to the much-desired 2% target rate.
Sources: Bloomberg, CNBC, Forbes, FX Street, NBC News, U.S. Bureau of Labour Statistics, TradingView
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