February Inflation Data Ahead of Fed Meeting: What to Expect

Economists expect the US Consumer Price Index (CPI) for February, a key indicator of goods and services inflation, to show that price growth continued to moderate last month, albeit just slightly from January’s level.[0] The CPI, which measures a basket of goods including gasoline, health care, groceries, and rent, is expected to have risen 0.4% over the prior month and 6.0% over last year.[1] Core CPI, which excludes volatile energy and food prices, is expected to have risen 0.4% for the third month in a row and 5.5% year-over-year.[2]

According to the CME FedWatch Tool, the market is divided on its expectations for the federal-funds effective rate at the Federal Reserve's March 22 meeting, with 55% of the market anticipating a 0.25 percentage point increase and 45% anticipating a 0.50 percentage point hike.[3]

The Federal Reserve has hiked interest rates by a cumulative 4.5% over the past year in an effort to quell inflation as Fed Chair Jerome Powell commits to aggressive monetary policy. Last week, Powell said the US central bank is likely to raise rates higher than previously expected if upcoming data shows that the economy remains hot after almost a year of tightening, but added that no decision has been made yet about the upcoming March meeting.

On Tuesday, the inflation numbers were released, which is slightly more than a week before the Federal Reserve's upcoming policy announcement scheduled for March 22. Investors are now predicting that the central bank will increase interest rates by 0.25%, or 25 basis points.[2]

Analysts are expecting the widely-monitored Consumer Price Index (CPI) to depict consumer prices diminishing slightly in the previous month, with headline inflation projected to climb 6% compared to the previous year, a decline from 6.4% year-on-year in January, according to Bloomberg's estimates.[4]

On Tuesday, March 14 at 12:30 GMT, the US Bureau of Labor Statistics (BLS) will publish the key inflation index, the US Consumer Price Index (CPI) data.[5] As we get closer to the release time, consensus forecasts are calling for CPI to rise 6% over last year on a headline basis and 5.5% on a “core” basis in February, according to data from Trading Economics.[6]

0. “How will the Federal Reserve read US Consumer Price Index data?” FXStreet, 14 Mar. 2023, https://www.fxstreet.com/news/cpi-data-expectations-analyzing-february-us-inflation-202303140600

1. “February inflation report likely to show consumer prices remain elevated” Yahoo Finance, 14 Mar. 2023, https://finance.yahoo.com/news/february-inflation-report-likely-show-060049349.html

2. “Markets Brief: The February CPI Report Holds the Key to the Fed's Next Move” Morningstar, 10 Mar. 2023, https://www.morningstar.com/articles/1143551/markets-brief-the-february-cpi-report-holds-the-key-to-the-feds-next-move

3. “Commodities Week Ahead: Oil, Gold Caught Between Slow-Boil SVB Crisis, CPI” Investing.com, 13 Mar. 2023, https://www.investing.com/analysis/commodities-week-ahead-oil-gold-caught-between-slowboil-svb-crisis-cpi-200636149

4. “All eyes on US inflation data, bank analysts expect sticky figures” FXStreet, 14 Mar. 2023, https://www.fxstreet.com/news/us-inflation-forecast-easing-only-slowly-still-sticky-previews-by-10-banks-202303131227

5. “In the shadow of Silicon Valley Bank's collapse, U.S. to get latest inflation data” msnNOW, 14 Mar. 2023, https://www.msn.com/en-us/money/markets/in-the-shadow-of-silicon-valley-banks-collapse-us-to-get-latest-inflation-data/ar-AA18B9MS

6. “SVB fallout, inflation, retail sales: What to know this week” Yahoo News, 12 Mar. 2023, https://news.yahoo.com/svb-fallout-inflation-retail-sales-what-to-know-this-week-134712538.html

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