Inflation picked up in February in the United States and the data cools expectations of a quick interest rate cut by the Federal Reserve.
As AFP reports, the February data is known in the middle of the electoral campaign, with the purchasing power as one of the central issues in the fight for the White House.
Regarding the data itself, the increase in consumer prices was 3.2% in the 12 months ended in Februarycompared to a measurement of 3.1% in January, according to the IPC published Tuesday by the Department of Labor.
Inflation in the United States slowed in January and stood at 3.1% year-on-year
The point is that Analysts expected 12-month inflation to remain stable at 3.1%.
The upward variationa is explained by increases in the prices of housing, gasoline, and plane tickets.
In month-by-month measurement Inflation went from 0.3% in January to 0.4% in February. The figure is in line with what analysts expected, according to the consensus gathered by Market Watch.
But, The positive fact of the report is that underlying inflation, which excludes the most volatile prices, such as food and energy, se moderated in the monthly measurement (to 0.4%) and in the 12-month data, which marked 3.8% in February compared to 3.9% in January. The annual figure is the lowest since May 2021.
What is the current rate in the US?
The Federal Reserve (Fed, central bank) raised its rates to a range of 5.25-5.50% to combat inflation. Raise rates It discourages access to credit and with it consumption and investment, thus lowering pressures on prices.
The market is excited about a soon rate cut that will lower the price of money and thus stimulate the economy. But the Fed, which favors another measurement of inflation other than the CPI called PCE, has a target of an annual price increase of 2%.
The US central bank will hold its next monetary policy meeting on March 19 and 20.
For now “prudence”
These data “will reinforce the prudence of Fed managers,” predicts Kathy Bostjancic, chief economist at Nationwide, who pointed to a first rate cut in May, but now estimates that “it is increasingly likely that (the Fed) will wait at least to June”.
The market is pointing to a cut in June, according to data collected by CME Group.
The Fed has signaled that it is waiting for signs of a lasting decline in inflation to begin its cuts.
This rebound will not encourage them “to think that inflation is on a sustained path towards its 2% target,” summarized Ryan Sweet, chief economist at Oxford Economics.
What will happen to the rate in the US?
The Federal Reserve “can and will” begin cutting its interest rates this year if the economic trend continues, the president of the US central bank, Jerome Powell, told lawmakers in Washington last week.
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“What we are seeing is continued strong growth (of the economy), a strong labor market and steady progress toward lower inflation,” Powell said at the Senate Banking Committee during its regular hearings on Capitol Hill.
The Fed strikes a delicate balance since “cutting too soon or too much” rates could once again boost inflation and then lead to further rate increases, Powell explained. On the contrary, reducing them “too late or too little could unnecessarily weaken economic activity and employment.”
The spike in prices eroded the purchasing power of American families and is a central issue of the electoral campaign less than eight months before the presidential elections that, barring any surprise, will be decided again between Joe Biden and Donald Trump.
“The prices of major products such as gasoline, milk, eggs and appliances are lower than a year ago,” Biden greeted in a statement after the release of the February data. And he reiterated that there is still “a lot to do” to reduce costs in the family basket.
Inflation peaked at 9.1% in June 2022.
The Fed expects to reach its 2% target for the PCE index in 2026.
Fuente AFP