Inflationary fears remain in the economy. The Bureau of Labor Statistics issued data on Tuesday showing that the consumer price index increased 3.2% year over year in the previous month. That surpasses the January pace of 3.1%.
The Consumer Price Index in the United States increased 0.4% month-over-month in February 2024, the most in five months, compared to 0.3% in January and matching forecasts.
The annual core consumer price inflation rate in the United States, which excludes volatile items such as food and energy, eased to a near three-year low of 3.8% in February 2024, down slightly from 3.9% in January but above market forecasts of 3.7%.
US core consumer prices, which exclude volatile items such as food and energy, rose by 0.4% from the previous month in February of 2024, the same as in the previous month and above market expectations of 0.3%.
Despite these numbers, market sentiment about the Federal Reserve’s approach to interest rates remains essentially unchanged, with traders expecting the first rise in June. The current market pricing indicates that the Fed won’t cut interest rates at its meeting on March 19-20 or the one on April 30 to May 1.
Markets should prepare for volatility as investors are likely to react against a potential delay in rate cuts from the Federal Reserve, predicts the CEO of one of the world’s largest independent financial advisory and asset management organizations.
The prediction from deVere Group’s Nigel Green comes as US headline inflation comes in at 3.2% in January, higher than expected, and core CPI dropped to 3.8%, also higher than expected.
Green comments: “The latest US CPI data reinforces our position that the Fed is almost now certainly not going to cut rates this month; and indeed it could, we believe, delay cutting rates until the third quarter of the year.”
The shelter index increased 5.7% over the last year, accounting for roughly two-thirds of the total 12-month increase in all items less food and energy index. Other indexes with notable increases over the last year include motor vehicle insurance (+20.6%), medical care (+1.4%), recreation (+2.1%), and personal care (+4.2%). Monthly, core consumer prices rose by 0.4% in February, the same as in the previous month and above market expectations of 0.3%.
Indexes that increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.
Investors will be concerned about the number’s potential impact on interest rates when inflation has started to rise a little faster than anticipated.
March 2024 CPI data are scheduled to be released on April 10, 2024, at 8:30 A.M. Eastern Time.