U.S CPI As Expected, Four U.S Rate Hikes Questioned

U.S consumer prices rose moderately last month, at a slightly slower pace than in January.

The consumer-price index rose +0.2% in February after rising a seasonally adjusted +0.5% in January.

Ex-food and energy, the core prices rose +0.2%, compared to +0.3% in January.

Market expectations were looking for a headline print of +0.2%, and a +0.2% core print.

In the year to February, overall prices rose +2.2%, the largest annual increase since November, while core prices were up +1.8% on the year. The market was expecting a +2.3% increase in overall inflation and core prices to rise +1.9%.

Wages

Real average hourly earnings were flat last month and real average weekly earnings rose a seasonally adjusted +0.3% on the month.

Digging deeper, today’s report showed an index of energy prices rose +0.1% on the month, as gas and fuel oil costs both fell. The price index for new auto’s declined for the second consecutive month, falling -0.5%. Cloth prices rose +1.5% on the month and transportation services increased +1%.

Despite the slightly tamer inflations numbers, fed fund futures are pricing in a +88.8% chance of a +25 bps hike at next weeks FOMC meeting (March 20-21).

Note: Fed policy makers have penciled in three rate increases this year, and have been monitoring the inflation picture closely.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell