JUST IN: U.S. consumer price increases eased slightly from January to February but still pointed to an elevated inflation rate that is posing a challenge for the Federal Reserve at a delicate moment for the financial system
Jerome Powell said the central bank is expecting"ongoing increases" in its benchmark interest rate as inflation remains far above the Federal Reserve’s 2% target.The government said Tuesday that prices increased 0.4% last month, just below January’s 0.5% rise. Yet excluding volatileand energy costs, so-called core prices rose 0.5% in February, slightly above January's 0.4% gain. The Fed pays particular attention to the core measure as a gauge of underlying inflation pressures.
When measured against prices a year ago, inflation has been easing for eight months. In February, consumer prices climbed 6% from 12 months earlier, down from January’s 6.4% year-over-year increase and well below a recent peak of 9.1% in June. Yet it remains far above the Fed’s 2% annual inflation target. Core prices in February rose 5.5% from 12 months ago, down slightly from 5.6% in January.
“We would be surprised if, just one week after going to great lengths to support financial stability, policymakers risked undermining their efforts by raising interest rates again,” Hatzius wrote in a separate note Monday. The possibility of a Fed pause underscores the sharp shift in the nation’s financial system and economy in barely one week. Last Tuesday, Powell had told the Senate Banking Committee that if hiring and inflation continued to run hot, the Fed would likely raise rates at this month’s meeting by a sizeable half-point.
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