US Inflation Steady, Rate Cut Odds Drop
US core inflation held steady at 2.5% in February, but geopolitical risk slashed the odds of a Fed rate cut at the next meeting to 0%.
The steady core inflation reading of 2.5% was the lowest since March 2021, matching forecasts and remaining unchanged from January. This figure excludes volatile food and energy prices, providing a view of underlying price changes. Geopolitical risks, especially the conflict in the Middle East, have driven up oil prices, creating concerns about rising energy costs impacting consumer prices. This has led to investors scaling back expectations for Fed rate cuts, as higher energy prices could complicate the Fed's policy outlook. Analysts suggest the February data doesn't reflect the full impact of the recent surge in oil prices due to geopolitical tensions. Some economists anticipate a potential jump in inflation in the coming months as the effects of the Iran war become more apparent. Despite the flat core inflation, some sectors saw notable increases, including medical care (+3.4%), household furnishings and operations (+3.9%), recreation (+2.3%), and personal care (+4.5%). The heavyweight shelter index increased by 3%, the same pace as in January.
