US Inflation: Can the Decline Justify a U-turn by the Fed?
Yesterday, US inflation data came out, vaguely opening up the possibility of a change in monetary policy. The annual inflation rate in the US slowed to 6% in February 2023, the lowest since September 2021, in line with market expectations and compared to 6.4% in January. Food prices grew at a slower pace (9.5% versus 10.1%), while the cost of used cars and trucks continued to decline (-13.6% versus -11.6%). The costs of energy (5.2% vs 8.7%) and diesel (9.2% vs 27.7%) also suffered a sharp slowdown, with petrol prices falling by 2% after a 1.5% increase in January. On the other hand, prices increased fastest for electricity (12.9% against 11.9%) and for housing (8.1% against 7.9%). Core inflation, which excludes the cost of food and energy, fell to 5.5% from 5.6%. Compared to the previous month, the CPI rose by 0.4%, after an earlier increase of 0.5% and in line with forecasts. The core rate, however, rose to 0.5% from 0.4%, versus expectations of 0.4%. Inflation in the US remains three times above the Fed's 2% target. Here is a short chart
here's a longer-term view
The drop in inflation is significant by size and by sector, even if we remain very far from the target of 2%, set in time, however. Given the crisis in the credit sector triggered by the bankruptcies of SVB and Signature Bank, this result could also justify a change of course by the Fed, with the end or the downsizing of the restrictive monetary policy and interest rate increases.
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The article US inflation: can the decline justify a U-turn by the Fed? comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/inflazione-usa-il-calo-puo-giustificare-uninversione-di-rotta-della-fed/ on Wed, 15 Mar 2023 11:24:34 +0000.