US inflation steady, Fed pause expected
February CPI held at 2.4%, prompting expectations the Fed will pause rate cuts for at least three meetings amid geopolitical concerns and rising oil prices.
The steady CPI is likely to reinforce the Fed's cautious approach, as officials have repeatedly stressed the need for more data before adjusting monetary policy. Recent geopolitical instability, particularly in Eastern Europe and the Middle East, adds further complexity to the economic outlook. Rising crude oil prices are a key factor influencing inflation expectations. Disruptions to global supply chains, combined with increased demand, are pushing prices higher, potentially offsetting the impact of tighter monetary policy. The market's reaction to the CPI data suggests investors are pricing in a higher probability of the Fed remaining on hold. Bond yields have edged up, and the dollar has strengthened, reflecting this shift in sentiment.
