Inflation Continues to Challenge the Fed

• U.S. Inflation Pressures Persist: February’s Consumer Price Index (CPI) rose by 0.4%, aligning with forecasts, yet the year-over-year increase of 3.2% slightly exceeded expectations. The core CPI, excluding food and energy, increased by 0.4% month-on-month, surpassing the predicted 0.3% rise.

• Steady Dollar Amid Inflation Data: The U.S. dollar maintained its position against various currencies, as markets digested the latest inflation figures, pondering their impact on potential Federal Reserve rate cuts. The U.S. yield curve’s rebound suggests a June cut might be less likely.

• Fed Rate Cut Expectations Adjusted: Following the inflation report, expectations for a Fed rate cut in June have been slightly reduced, with a 66% chance now priced in. The market anticipates two additional 25 basis point cuts by the end of 2024.

• Fed’s March Meeting in Focus: The upcoming Federal Reserve meeting on March 19-20 is highly anticipated for its rate decision and future monetary policy guidance, especially considering recent inflation data.

• Upcoming Economic Data: Focus shifts to upcoming U.S. retail sales and producer price data on Thursday, offering further insight into consumer spending and inflation trends.

• European Central Bank’s Framework Review: Markets await the European Central Bank’s decision on its operational framework review, affecting interest rates and monetary policy within the Eurozone.

• 35
• 0