U.S. Annual Inflation Rate Eases to 6%, India’s Inflation Remains Above 6% Tolerance Threshold
Inflation in the U.S. rose at an annual rate of 6% in February, cooling from the prior month yet still above the Federal Reserve’s 2% target.[0] The closely watched Consumer Price Index (CPI) report, released on Tuesday by the Bureau of Labor Statistics, showed a 0.4% monthly increase, in line with average economist estimates.[1] The annualized rate of 6.0% was below the 6.4% registered in January and the forecast of 6.0%.[2] Core CPI, which excludes volatile food and energy prices, rose 5.5% year-over-year, matching economist estimates.[3]
The CPI inflation rate eased to 6%, down from 6.4% in January and in line with forecasts.[4] The consumer price index rose 0.4% on the month, while core CPI, which excludes volatile food and energy prices, rose 0.5% over the course of February, slightly faster than in January.[5] On a 12-month basis, core prices are up 5.5%, still significantly above the Federal Reserve's 2% target.[6]
The U.S. inflation report is the last major pieces of economic data to be released before the Fed’s policymaking meeting next week.[6] The decision to adjust rates might be complicated by the collapse of Silicon Valley Bank and Signature Bank, which forced the Fed to step in with emergency measures to backstop the banking system.
Meanwhile, India’s retail inflation remained above the central bank’s 6% tolerance threshold for the second successive month in February at 6.44%, virtually unchanged from 6.52% in January, as per the National Statistical Office. Except for November and December 2022, retail inflation has remained above the RBI's upper tolerance limit of 6 per cent since January 2022.
In response to Silicon Valley Bank, Signature Bank, and Silvergate succumbing to collapse, the Federal Reserve, Treasury, and Federal Deposit Insurance Corporation joined forces to try to prevent further damage. The Fed had to take emergency measures to support the banking system due to the downfall of Silicon Valley Bank and Signature Bank, making the decision complicated.
According to CME Group's FedWatch tool, the market anticipated a 62% chance of a quarter-point increase in rates and a 38% probability that benchmark rates would stay the same as of Monday night.[3]
0. “Inflation rose at annual rate of 6% in February” CBS News, 14 Mar. 2023, https://www.cbsnews.com/news/inflation-cpi-report-february-2023-03-14
1. “Stocks Volatile As CPI Inflation Meets Expectations, Attention Shifts To The Fed's Next Move – SPDR S&P 5” Benzinga, 14 Mar. 2023, https://www.benzinga.com/news/23/03/31338742/stocks-volatile-as-cpi-inflation-meets-expectations-attention-shifts-to-the-feds-next-move
2. “US CPI rose 6.0% in February, per the Bureau of Labor Statistics” Business Insider, 14 Mar. 2023, https://www.businessinsider.com/inflation-price-growth-us-cpi-february-2023-3
3. “Inflation rose 6% in February as Fed mulls more rate hikes amid bank chaos” New York Post , 14 Mar. 2023, https://nypost.com/2023/03/14/inflation-rose-6-in-february-as-fed-mulls-more-rate-hikes
4. “CPI Inflation Rate Still Pretty Hot, But Fed May Pause” Investor's Business Daily, 14 Mar. 2023, https://www.investors.com/news/economy/cpi-inflation-rate-still-pretty-hot-but-fed-may-pause-sp-500-futures-rise/
5. “US annual inflation eases to 6.0%; Futures extend gains | Mint” Mint, 14 Mar. 2023, https://www.livemint.com/economy/us-annual-inflation-eases-to-6-0-futures-extend-gains-11678797527452.html
6. “Consumer Price Index key to figure out what’s next for the Federal Reserve” FXStreet, 14 Mar. 2023, https://www.fxstreet.com/news/cpi-data-expectations-analyzing-february-us-inflation-202303140600
