Source: AFP
Consumer inflation unexpectedly accelerated in February, US government data showed on Tuesday, a development that could give policymakers pause as they consider when to start cutting interest rates.
While price increases have eased from peaking in 2022, households are still feeling the pinch from the cost of living, adding to pressure on US President Joe Biden as he seeks re-election this year.
The annual consumer price index (CPI) stood at 3.2 percent last month, the Labor Department said on Tuesday, a sign that those pressures may not ease quickly.
The “core” measure that strips out volatile food and energy prices fell slightly to 3.8%, but beat the 3.7% analysts had expected.
The Labor Department noted that indices for roofing and gasoline both rose in February.
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In total, they contributed more than 60 percent of the monthly increase for the overall index, it said.
From January to February, inflation rose 0.4%, also up from the previous month.
Analysts expect the Federal Reserve to focus on underlying inflation when deciding the best time to start cutting interest rates.
To curb persistent price increases, the central bank launched a series of rapid rate hikes in 2022, before keeping the level at its highest level in more than two decades at recent meetings.
The Fed has signaled it could start cutting interest rates this year as long as there is continued progress in reducing inflation.
But the bumpy road to the long-term goal of two percent could bring some challenges.
Energy price jump
The Labor Department pointed to housing inflation, which came in at 0.4 percent on a monthly basis, as another key contributor to the overall index — though the number represented a slowdown from January’s 0.6 percent.
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Energy prices rose 2.3% from January to February, reversing the previous month’s decline.
“Core is the Fed’s target, so in a sense it’s more important for policy,” said Dan North, senior economist at Allianz Trade North America.
“The Fed cannot control oil prices in a dangerous geopolitical world using domestic interest rates. But it can influence the rest of the economy with them,” he told AFP.
Economists expect officials will want to see more evidence that prices are falling sustainably before turning to rate cuts.
“The latest data further strengthens the case for a patient and cautious approach by Fed officials as they consider future policy decisions,” said economist Rubeela Farooqi of High Frequency Economics.
Source: AFP