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Jakarta, CNBC Indonesia – United States (US) inflation rose in February 2023. However, this was in line with expectations, which could provide important input regarding the increase in interest rates by The Federal Reserve (The Fed).
Launching CNBC International, the US Department of Labor on Tuesday (14/3/2023) reported the consumer price index (CPI) increased 0.4% in February, putting the annual inflation rate at 6%. The report is exactly in line with the Dow Jones forecast.
Excluding food and energy prices, core CPI also rose 0.5% in February and 5.5% on a 12-month basis. The monthly report was slightly above the 0.4% forecast, but the annual rate was in line with predictions.
For the Fed, the monthly CPI, which measures the price of a basket of goods and services, has been the main data point in its decision to raise interest rates over the past year. Since March last year, interest rates have risen from zero to 4.5% to 4.75%, the highest level since 2007.
Over the past week, the Fed’s calculations have changed dramatically. The collapse of US$200 billion Silicon Valley Bank (SVB) and the subsequent turmoil that followed, has created a formidable obstacle to the Fed’s hard-fought struggle to bring inflation down by raising interest rates.
Last week, Fed Chair Jerome Powell told Congress that the US still has a long way to go in reducing inflation. This implies that the Fed will not only continue to raise interest rates in the coming months, but will do so aggressively.
Powell said he was unhappy with the small drop in inflation in January, coupled with data showing a strong labor market and consumer spending.
“We are very committed to bringing inflation back to our 2% target,” Powell said last Tuesday, citing the Guardian. “We will stay on track until the job is done.”
While economists predict that as a result of the SVB debacle, the Fed will not touch interest rates, a move that is likely to roil markets.
But the final decision will be left to Powell and the board at the Fed’s next board meeting on March 21 and 22. There he will decide on US interest rates.
(pgr/pgr)
