Inflation data to be released on Tuesday will reveal the latest price movements, a key economic signal for central bankers weighing interest rate cuts and voters turning their attention to the general election.
Price increases have cooled dramatically from a peak of about 9%, but inflation still stands more than a percentage point higher than the Federal Reserve’s target rate of 2%.
The latest release from the U.S. Bureau of Labor Statistics is expected to show that consumer prices increased 3.1% over the year ending in February. That finding would leave the annual inflation rate unchanged from the prior month.
Core inflation — a closely watched measure that strips out volatile food and energy prices — is expected to have increased 3.7% over the year ending in February, which would mark a slight cooldown from the previous month.
After progressing steadily lower for much of last year, the inflation rate has stalled in recent months.
The bout of stubborn prices has arrived as the Federal Reserve weighs interest rate cuts. Such a move would start to reverse a near-historic series of rate hikes that dates back to March 2022, when the Fed sought to rein in excessive price increases.
Addressing House members at the Capitol last week, Fed Chair Jerome Powell reaffirmed the Fed’s plans to cut rates this year but cautioned that the central bank first wants to see inflation fall lower.
“The economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured,” Powell told lawmakers.
Interest rate cuts would lower borrowing costs for consumers and businesses, potentially triggering a burst of economic activity through greater household spending and company investment.
But the Fed risks a rebound of inflation if it cuts interest rates too quickly, since stronger consumer demand could lead to an acceleration of price increases.
At its most recent meeting, in January, the policymaking body at the Fed opted to leave rates unchanged. The fed funds rate remains between 5.25% and 5.5%, the highest interest rate since 2021.
Still, the economy has largely defied expectations of a slowdown imposed by elevated borrowing costs.
U.S. job gains far exceeded expectations in February, U.S. Bureau of Labor Statistics data on Friday showed.
The U.S. added 275,000 jobs in February, surpassing predictions of about 200,000 jobs added, but marking a substantial decline from the hiring of roughly 350,000 workers in January, according to BLS data.
The S&P 500 — the index that most people’s 401(k)’s track — reached a record high last week.
Attitudes about the economy have improved in recent months. Consumer sentiment inched lower in February but preserved much of the large gains achieved in previous months a University of Michigan survey found.
Even so, some areas of the economy have cooled.
Consumer spending, which accounts for roughly two-thirds of U.S. economic activity, fell sharply in January.
Meanwhile, the housing market has slowed substantially due in large part to soaring mortgage rates.
The average interest rate for a 30-year fixed mortgage has soared to 6.88%, rebounding after a steady decline at the end of last year, according to a report from Freddie Mac on Thursday.
Looking back further, that figure has skyrocketed from an average 30-year fixed mortgage rate of 3.76% prior to when the Fed began raising interest rates in March 2022, data shows.
Taken together, economic performance has not shaken the Fed’s steadfast pursuit of lowering inflation down to its goal of 2%, Powell told federal lawmakers last week.
“We remain committed,” Powell said.
Inflation is a key economic indicator that measures the rate at which prices for goods and services rise over a period of time. It is an important factor that affects the purchasing power of consumers and the overall health of an economy. In recent news, the February inflation rate has remained stable, signaling a positive trend for the economy.
According to the latest data released by the Bureau of Labor Statistics, the Consumer Price Index (CPI) for February showed a modest increase of 0.2%. This is in line with expectations and indicates that inflationary pressures are being kept in check. The core CPI, which excludes volatile food and energy prices, also rose by 0.2% in February.
One of the main factors contributing to the stable inflation rate is the Federal Reserve’s monetary policy. The Fed has been closely monitoring inflation and has implemented measures to keep it at a moderate level. By adjusting interest rates and other monetary tools, the Fed aims to achieve its dual mandate of maximum employment and stable prices.
Another factor that has helped keep inflation in check is the steady growth of the economy. With low unemployment and strong consumer spending, businesses have been able to raise prices without causing a significant spike in inflation. Additionally, the recent decline in oil prices has helped to offset any potential inflationary pressures from rising energy costs.
Overall, the stable inflation rate in February is a positive sign for the economy. It indicates that businesses are able to adjust prices without causing undue harm to consumers, and that the Federal Reserve’s monetary policy is effectively managing inflationary pressures. As we move forward, it will be important to continue monitoring inflation data to ensure that it remains stable and does not become a threat to economic growth.
