May 31, 2024

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US Inflation Rises Slightly – Business AM

US Inflation Rises Slightly – Business AM

US consumer prices rose 3.2 percent last month. That means inflation was slightly higher than in January. Then it was 3.1 percent. Experts suggest that the central bank will wait for some time before cutting rates.

In the message: US inflation was 3.2 percent in January.

  • Not only did inflation pick up speed, but the number was (again) higher than expected. Economists had expected inflation to remain unchanged.
  • On the other hand, core inflation eased from 3.9 to 3.8 percent in February, but price inflation was still stronger than expected. Economists had expected core inflation to be 3.7 percent.

Bad news for the central bank

details: Consumer prices in the U.S. are rising more sharply than expected, increasing the likelihood that the Fed will wait a little longer to change its interest rate policy.

  • Reminder: The central bank aims for an inflation rate (on average) of 2 percent. Jerome Powell, chairman of the US Federal Reserve, recently reiterated in the US House of Representatives that a rate cut is appropriate only when inflation falls steadily below the central bank's target.
    • “The economic outlook remains uncertain and sustained progress towards the 2 percent inflation target is not guaranteed. Easing policy too soon or too much could lead to a rebound in inflation. Easing policy too late or too little would unnecessarily weaken economic activity and employment,” it said.
    • “The current rate of inflation may be a reason to maintain the current monetary policy for a little while longer,” said Cathy Jones, strategist at asset manager Charles Schwab, in a conversation with the news agency. Bloomberg. “Corruption appears to be offsetting the downward trend in inflation, and the central bank wants to see inflation fall further before cutting rates.”
  • Experts and some central bankers have long warned that the final stretch of the inflation war could be too difficult. In any case, markets continue to assume that the first cut will come in June.
    • According to Jamie Dimon, CEO of US bank JP Morgan, central bank directors will have to wait even longer before switching their guns. “I think they have to make their decisions based on the available data. If I were them, I would wait,” he told a meeting of specialist news site the Australian Financial Review earlier this week. “Their credibility is somewhat at stake here. I'll wait until after June and let everything take its course.
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