Search
Close this search box.

Explore the world.

Assess underlying market conditions and fundamentals in the world's major economies.

World

Stay ahead.

Follow the biggest stories in markets and economics in real time.

Subscribe

Get insight into the latest trends and developments in global currency markets with breaking news updates and research reports delivered right to your inbox.

After signing up, you will receive regular newsletters from Corpay, and may unsubscribe at any time. View Corpay’s Privacy Policy

Well-prepared markets take hotter-than-expected inflation print in stride

Consumer price growth accelerated in the United States last month, suggesting that January’s hotter-than-expected print signalled a re-acceleration in underlying inflation pressures, and raising the odds on a more hawkish outlook from the Federal Reserve at next week’s policy meeting. According to data published by the Bureau of Labor Statistics this morning, the core consumer price index – with highly-volatile food and energy prices excluded – rose 3.8 percent in February from the same period last year, up 0.4 percent on a month-over-month basis. This slightly exceeded consensus estimates among economists polled by the major data providers ahead of the release, which were set closer to the 3.1-percent mark.

On a headline all-items basis, prices rose 0.4 percent on a month-over-month basis in February, up 3.2 percent over the previous year, topping the 0.3-percent pace set in January. Americans paid 2.3 percent more for energy on a month-over-month basis, with higher gasoline prices helping to reverse January’s -0.9 percent drop, while the shelter sub-index climbed 0.4 percent after rising 0.6 percent in the prior month. Food price growth stabilised at 0.4 percent month over month.

According to our estimates, the so-called “supercore” measure—which captures core services minus housing—rose 0.47 percent month-over-month, down from 0.85 percent in January, but far too hot for the Federal Reserve’s comfort.

Short-term Treasury yields are up modestly as investors pull back expectations for rate cuts from the Federal Reserve, and the dollar is adding to this morning’s gains – but equity futures are climbing, suggesting that markets were well prepared for a hotter-than-anticipated print.

Bottom line: Although markets appear to have feared something even worse, today’s data suggests that January’s acceleration in price pressures wasn’t a one-off. Policymakers at the Federal Reserve are likely to tread more cautiously, with the expected year-end Fed Funds rate embedded in next week’s “dot plot” summary of economic projections subject to a precautionary upward shift. Officials are also likely to express more hawkish perspectives in upcoming appearances, and the dollar’s ascendance could resume accordingly.

Inflation measures, annual % change

Euro Crisis Flashbacks Hit Markets
European political nerves
Market Calm Returns
US inflation vs the Fed
Fed Signals One Cut in 2024, Down From Three
US Inflation Decelerates Sharply, Bolstering Rate Cut Odds

Latest Analysis

Latest Analysis