Investing.com - Growth in U.S. consumer prices rose only marginally in February, further supporting the case for the Federal Reserve to hold off from further increases in interest rates in the near term.
The consumer price index rose 1.5% from a year ago, while core inflation, that excludes volatile food and energy costs, increased 2.1%. That compared to consensus forecasts for them to remain stable at 1.6% and 2.2%, respectively.
For the month, the CPI and core CPI were up 0.2% and 0.1%, respectively.
As the Federal Reserve seeks to keep core inflation close to 2%, the reading poses little threat to its most recent guidance, which said it would “be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate."
The dollar extended modest losses on the news, while yields on the benchmark 10-year U.S. Treasury bond inched higher to 2.654%. Stock index futures also pared losses following the data.
Speaking last Friday, Fed Chairman Jerome Powell justified the Fed's “wait-and-see approach”, given that there was “nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures.”
Markets remain skeptical that the Fed could move forward with a rate hike this year, particularly after the employment report showed weak job creation in February.
Fed fund futures reflect no expectations for any such move and imply the probability that the next move will in fact be a cut at above 10%.
But policymakers are keeping a close eye on wage inflation, given its ability to put upward pressure on prices. The latest employment report showed wages rising at their fastest annual pace in 10 years,
Some analysts warn that decent economic performance and rising inflation pressures set the stage for the Fed to kick the monetary policy machine out of neutral and hike rates hike as soon as the end of this summer - if an escalation of the U.S.-China trade war can be comprehensively avoided.