The US Bureau of Labor Statistics (BLS) is set to release the Consumer Price Index (CPI) inflation report for February on Wednesday at 12:30 GMT. The report is expected to influence the US Dollar (USD) and the Federal Reserve’s (Fed) monetary policy decisions, as markets weigh the likelihood of interest rate cuts amid slowing economic growth and global trade concerns.
What to Expect from the US CPI Data?
Annual Headline CPI: Expected to rise 2.9% (vs. 3.0% in January).
Annual Core CPI (ex-food and energy): Forecasted to ease to 3.2% (vs. 3.3% in January).
Monthly CPI: Projected to increase by 0.3%, in line with the prior month.
Analysts at TD Securities suggest that core CPI inflation is likely to slow down following January’s unexpected rise in service-sector prices. They anticipate a moderation in both goods and services inflation, with owners’ equivalent rent (OER) cooling to a three-month low.
Market Impact: How Will the CPI Data Affect the Fed and USD?
Recent US economic data has reinforced concerns over a potential slowdown, increasing expectations for Fed rate cuts. Markets are now pricing in 85 basis points (bps) of rate cuts by the Fed in 2024, up from 75 bps at the start of the week, per LSEG Fed interest rate probabilities.
Key indicators signaling economic weakness:
February Nonfarm Payrolls (NFP): 151,000 jobs added (vs. 160,000 expected).
Unemployment Rate: Rose to 4.1% (vs. 4.0% expected).
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