February’s CPI report marks consecutive months of stronger-than-expected U.S. inflation. The 0.4% increases in both the headline and core CPI were a touch above our call for 0.3% growth. The monetary policy implications of February’s CPI are more significant than most reports. Ultimately, we do not believe inflation is reaccelerating. The CPI for shelter continues to keep inflation elevated in a way that does not represent consumers’ actual experiences. Further, our view that shelter prices will steadily come down in 2024 is unchanged. Nevertheless, consecutive months of upside surprises will lend support to the policymakers at the Federal Reserve urging patience. Our March baseline forecast puts the first rate cut in June, which is a meeting later than we expected last month.
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