Inflation declines to 6% in February in sigh of relief for economy

Inflation sThe Bureau of Labor Statistics reported Tuesday that the rate of inflation fell to 6% in February. This is a good sign as the Federal Reserve prepares for its next monetary policy meeting.

The consumer price index’s much-anticipated results show that inflation is not too high but is cooling. Fed’s aggressive Rate of interest hikes.

The previous month, inflation was at 6.4%. After the June peak of 9.1%, Tuesday’s report shows seven months of declining annual inflation.

SVB COLLAPSE FED’S PLAN FOR RATE HIT HIKES FALLS BY THE WAYSIDE

The index showed that prices rose by 0.4 percent between January and February, as opposed to an annual basis. There was also a decrease in December to January.

Meanwhile, “core inflation,” It eliminates volatile food and energy prices. The year ended in February saw a 5.5% increase.

Consumers are feeling the pinch from higher food prices. Many households have found it difficult to cope with the rising cost of food. The cost of chicken has increased 8.8% in the past year while that of dairy products has increased 12.3%.

This comes amid increased tensions within the financial sector, following Friday’s announcement of the Federal Deposit Insurance Corporation. Silicon Valley BankSVB (also known as SVB) had failed and was taken into the government’s hands. Signature Bank, a cryptocurrency lender, followed on Sunday. Over the weekend, officials assured that the banking system is sound.

“That’s one data point, a signal, in the continuing trend of the Fed’s policy, but in light of SVB, it raises questions as to the Fed’s next action next week,” Brian Marks is the Executive Director of the University of New Haven’s Entrepreneurship and Innovation Program. He spoke to The Washington Examiner. He said that a moderate rate increase is possible.

Next week, the Fed will be meeting to decide whether or not to raise interest rates. Some are concerned that if it does so, it could trigger a recession. Investors hoped for a cooler CPI report to show that the Fed may hold off on raising interest rates this month due to the SVB collapse.

Despite the ensuing yearlong series of interest rate changes, the labor market has been hot.

Last week, the economy added 311,000 jobs in February. The steady job growth has allowed the unemployment rate to trend down.

Stronger jobs reports indicate that the Fed’s rate increases are not having the punch they want. This could lead to the Fed leaning toward a more aggressive monetary stance at its next meeting later in the month. However, the SVB debacle is putting pressure on the Fed.

Recently, Fed Chairman Jerome Powell stated that hot inflation reports are as important as job data. “suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

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