Despite June Easing Bets, There Is Growing Risk We Won’t See Rate Cuts Until 2025
Don’t expect the Federal Reserve to cut interest rates anytime soon as sticky inflation seems to be very much intact at this point.
Tuesday’s much-anticipated U.S. February consumer price index (CPI) inflation report came in hotter than expected for the second straight month, providing further evidence that the Fed will be in no rush to start easing monetary policy.
Source: Investing.com
The CPI rose 0.4% last month, marking the largest monthly increase since September. In the 12 months through February, the annual CPI increased 3.2%. That followed a gain of 3.1% in January.
While CPI has come down significantly from a 40-year high of 9.1%, the data confirmed that the decline in inflation that began in the summer of 2022 has all but stalled.
Source: Investing.com
In fact, taking a closer look at the chart above reveals that the headline figure has been stuck in a range between 3.0% and 3.8% for the past eight months, highlighting the challenge faced by the Fed in the ‘last mile’ of its fight against rising prices.
The ‘last mile’, which is often the hardest to bring under control, refers to the final 1% or 2% of excess inflation that the Fed needs to overcome to meet its 2% target.
Excluding the volatile food and energy components, core CPI climbed 0.4% over the prior month and 3.8% over last year. The forecast had been for 0.3% and 3.7%, respectively.
Furthermore, core services inflation excluding rents, a metric to which Fed Chairman Jerome Powell has said he pays close attention, advanced 0.5% in February, and over the past three months is up on an annualized basis by 6.8%, compared with the 6.7% pace in January.
The sticky-hot readings will add to Fed caution on the inflation outlook and suggest that FOMC officials
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