Saturday, April 1, 2023

Fed: US consumer inflation still up but Fed under stress – Usky News

Washington: US consumer inflation eased in February but remained high, according to government data released on Tuesday, increasing pressure on the Federal Reserve as it balances its inflation battle with financial stability concerns.
The central bank has been waging an aggressive campaign to tame inflation, raising interest rates eight times since the beginning of last year to dampen demand. Whereas irrigated Chair Jerome Powell The collapse of initially saying the Fed was ready to increase the pace of rate hikes if necessary as economic data runs hot Silicon Valley Bank ,svb) last week and New York-based Signature Bank could complicate its efforts.
The consumer price index (CPI) rose six percent from a year earlier, according to Labor Department data released Tuesday, down from January’s figure and in line with expectations.
While this was the smallest annual increase since September 2021, the level is well above policymakers’ long-term two percent inflation target.
Between January and February, the CPI rose 0.4 percent, which was also slower than the previous month.
“The index for shelter was the largest contributor … accounting for more than 70 percent of the increase,” the Labor Department said in a statement.
It added that indices of food, entertainment as well as home furnishings and handling were also contributors.
Notably, the food index in February remained nearly 10 percent above the previous year’s level, with food prices still high.
Meanwhile, the cost of shelter and transportation services soared, underscoring the challenges of containing inflation.
Excluding the volatile food and energy sectors, the CPI increased 0.5 percent from January, down from the previous month’s number.
While many analysts predicted the Fed could hike its rate as the economy warms more than expected, some are now dialing back their expectations.
The Fed and other central banks around the world have been raising interest rates since last year to control decades of high inflation.
This helped many lenders post healthy profits for 2022, but higher rates have also eroded the value of bonds bought by banks when their returns were lower.
SVB fell after losing $1.8 billion selling $21 billion in securities.
The explosion marked the biggest banking failures since the 2008 global financial crisis, leaving the Fed in a difficult position as it tries to fight inflation without adding to the ongoing outflow of some banking stocks.
Rubella Farooqui, economist at High Frequency Economics, said the data supports a 25 basis point hike at the Fed’s upcoming policy meeting.
“However, the decision will ultimately depend not only on economic data but also on financial stability concerns, which could keep the Fed on edge next week,” she said.


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