U.S. inflation rose 3.2% in February, which is also a stubbornly high number and likely won’t incentivize the Federal Reserve to cut interest rates this spring.
The consumer price index, which measures changes in the cost of everyday goods and services, was slightly higher in February than the 3.1% headline inflation rate of economists surveyed by FactSet.
Consumer prices have not declined year over year since President Joe Biden’s term began in January 2021.
The closest the economy came to negative annual growth since President Biden took office was in July 2022, with inflation “unchanged” at a very high 8.5%.
Overall, prices have increased by a staggering 19% since December 2020, the month before Mr. This is despite the fact that he has insisted that [government’s] deficit. ”
But the deficit will exceed $1.7 trillion in 2023, according to Treasury data, and the amount has nearly doubled over the course of last year.
On a monthly basis, price increases last month were mainly driven by housing and gasoline indexes, which rose slightly by 0.4% and contributed more than 60% of the increase.
Core CPI, which excludes volatile food and energy prices, slowed to 3.8% in February after rising 3.9% in December and January.
The figure, a measure closely watched by policymakers over the long term, was slightly higher than the 3.7% expected by economists polled by FactSet.
The latest inflation figures have failed to bring inflation closer to the 2% target, with central bankers and investors hoping for the first of three rate cuts in the first half of 2016. tends to disappoint. Year.
In addition to housing and gasoline, the Bureau of Labor Statistics attributes the CPI increase to increases in airfare, auto insurance, clothing, and overall recreation.
Meanwhile, the index for personal care and home furnishings declined.
The food index was flat in February, as was the at-home food index, while the out-of-home food index rose by 0.1% over the month.
Unlike the CPI, February’s jobs report showed a slight rise in the unemployment rate, which it said was a welcome sign that the economy was slowing.
The closely watched employment report showed that the unemployment rate rose to 3.9%, breaking a three-month streak in which the unemployment rate remained stable at 3.7%. The increase will likewise support the Federal Reserve’s push to cut interest rates in the coming months. Traders are currently forecasting June.
Reuters
Still, U.S. employers added a surprisingly large 275,000 jobs last month, according to the Labor Department, significantly outpacing the 198,000 job gain expected by economists.
Annual wage increases also increased by 5 cents to $34.57 in February, after increasing by 18 cents in January.
Wage increases are thought to contribute to higher inflation rates, and have historically been an important indicator of inflation, because when companies pay their employees more, the cost of goods and services rises.
The latest data echoes what Federal Reserve Chairman Jerome Powell told U.S. lawmakers last week that progress in lowering inflation is “not guaranteed.”
He said central bank officials “want to see further data to give them confidence and see a sustained decline in inflation to 2%” before cutting rates.
The remarks came nearly two years after inflation reached a staggering peak of 9.1% in June 2022, prompting Fed officials to launch a campaign to raise interest rates and raise the benchmark rate in 2022 and 2023. The federal funds rate has been raised 11 times, reaching its current 22-year high. , between 5.25% and 5.5% in July 2023.
Nevertheless, policymakers have managed to avoid a recession, which is attributed to a healthy job market.
Even billionaire hedge fund magnate Ray Dalio and JPMorgan CEO Jamie Dimon were wrong in predicting a recession.
In September 2022, Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, said: market watch He said the U.S. was likely to enter a recession in 2023 or 2024, citing the Fed’s interest rate hikes aimed at curbing inflation at the time.
Shortly after, and as recently as November, Mr. Dimon sounded the alarm on the possibility of a recession, warning Wall Street of a so-called “hard landing” in which the economy declines rapidly, and calling for “runaway inflation,” interest rates, economic blamed the influence of He spoke about Russia’s war in Ukraine in an interview with CNBC.
