Although US consumer price hikes slowed down from January to February, they remained at an elevated level, which is currently posing a challenge for the Federal Reserve, especially during this critical time for the financial system.
According to the government, prices rose by 0.4% in February, slightly lower than January’s 0.5% increase. However, when excluding the volatile food and energy costs, known as core prices, the prices rose by 0.5% in February, slightly higher than January’s 0.4% gain. The Fed closely monitors the core measure as a means to assess the underlying inflation pressures.
Despite prices increasing much more rapidly than the Fed desires, some economists anticipate that the central bank will halt its one-year-long series of interest rate hikes when it convenes next week, the Associated Press reported.
Given the recent collapse of two significant banks since Friday, leading to anxiety about other regional banks, the Fed might presently concentrate more on elevating confidence in the financial system than on its long-term effort to curb inflation.
There has been a significant change in perspective compared to just a week ago when Chair Jerome Powell informed a Senate committee that if inflation persisted, the Fed could increase its benchmark interest rate by a substantial half-point at its March 21-22 meeting.
Typically, when the Fed increases its key rate, it results in higher rates on mortgages, auto loans, credit cards, and several business loans, as reported by the AP.
Written by staff