12 March 2024
If you are covering the latest US inflation data, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“Today’s US CPI data release shows the headline rate of inflation ticked up from an annual rate of 3.1% in January to 3.2% in February. Although annual core inflation moved in the opposite direction, dipping to 3.8% compared to 3.9% in January, the month-on-month rate was 0.4%, slightly higher than market expectations and running at the same pace as last month.
“With the energy index rising 2.3% over the month, this serves as a reminder that this volatile component can cause noticeable swings at the headline level, while shelter costs, a key contributor to core figures, were also a significant driver. It is worth remembering that last month’s data saw core month-on-month CPI rise at the fastest rate since May 2023 as the disinflationary story stuttered amidst stubbornly high inflation in services and shelter costs. This will have given the data-dependent Federal Reserve pause for thought, with today’s figures offering little further reassurance. When you also consider the strength of recent indicators, ranging from the still solid labour market to healthy corporate earnings, it seems likely that the Fed will continue to tread carefully at its next couple of monetary policy meetings.
“Expectations for rate cuts were pushed out slightly in response to the January inflation figures, but equity markets managed to shake this off amidst rising confidence in a soft landing. Consensus has been building around June bringing the first rate cut, but today’s figures seem unlikely to add much in the way of certainty to this. Similarly, the Survey of Consumer Expectations data published by the New York Fed yesterday revealed that consumer expectations of inflation over the next 12 months haven't moved, but medium to long term expectations are shifting higher, which will not have passed unnoticed by the Fed.
“All eyes will now turn to the Fed’s interest rate decision next week. Its data-dependent approach is expected to continue, but we could start to see a clearer path ahead being mapped out - though we are unlikely to see the start of any cuts until at least the summer months.”
