CPI came in at 6.0% YoY - will the Fed pivot?
The latest US consumer price index (CPI) was released minutes ago and here is the update from investing:
The MoM forecast was for 0.4% but the actual turned out to be higher at 0.5%. The CPI YoY hits 6.0% which is the same as the forecast.
Despite the recent interest rate increases, the MoM inflation has increased against the forecast. Inflation has remained sticky at 6.0% (YoY).
The notable factors from the inflation report (for 12 months ending Feb 2023):
Food is up 9.0%
Energy services are up 13.3%
Services less energy services are up 7.3%
The item with that biggest 1 year increase is transportation services at 14.6%
The biggest drop is in used cars and trucks at -13.6%
This is reported by CNBC:
Shelter costs, which make up about one-third of the index’s weighting, jumped 0.8%, bringing the annual gain up to 8.1%. Fed officials largely expect housing and related costs such as rent to slow over the course of the year.
Source: https://www.cnbc.com/2023/03/14/cpi-inflation-february-2023-.html
My investing muse
The inflation remains sticky and far away from the 2.0% target. The months of interest rate hikes have not yielded the expected result. With this, we can expect the Fed to remain hawkish though there are some other data sets (unemployment) to consider before making the decision next week.
Some have cited the recent Silicon Valley Bank (SVB) saga to cause a pullback of interest rates. Personally, SVB has failed due to its mismanagement and thus, the Fed can continue interest rate hikes to bring down inflation.
The market seems to take the news positively with Dow gaining 200 points and the bank stocks showing a strong rebound as of the time of writing. Let us monitor and invest carefully.
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