The US Federal Reserve meets next week to decide whether to maintain rates at the current level or to make a beginning to its monetary easing policy. But, before that the focus is now on the US CPI numbers for February, which are due today. The February 2024 CPI data are scheduled to be released by the Bureau of Labor Statistics today March 12, 2024, at 8:30 A.M. Eastern Time.
The previous set of inflation data for January released last month threw a surprise. The US annual inflation rate remained at 3.1% ( month-on-month rate to 0.3%) in January 2024, slightly higher than the forecasted 2.9%. Also, annual core inflation remained steady at 3.9%, contrary to expectations of a slowdown to 3.7%.
The market
US economic data released last week indicates a slowdown, bolstering the case for a rate cut later this year.
Fed Chair Powell in his testimony last week reaffirmed the Fed’s initial statement that it is not in a rush to lower rates and won’t do so until inflation has significantly decreased to 2%. Powell feels that the right time to start cutting rates will be when the economic data supports it.
If inflation remains sticky, investors would expect the Fed to keep interest rates higher for longer, which would mean a delay in monetary policy easing. Even if a rate cut happens, Nigel Green, deVere Group CEO and Founder has a different view – The Federal Reserve’s upcoming interest rate cut this year is expected to be followed by another pause.
The soft landing narrative suggests the US economy
It will be a very calm week ahead of major central bank announcements later this month from the Fed, Bank of Japan, and Bank of England
Speculation is growing that the Bank of Japan would raise interest rates as soon as its March meeting, thus a higher revision to Japan’s Q4 GDP estimate on Monday might boost the yen versus the dollar, which has already climbed about 2% in the last week.