The decline in inflation in the US has stalled recently. The central bank’s favorite target came in higher than expected last month.
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Price inflation in the USA came in at 2.7 per cent in March, compared to the same time last year. This is shown by recent PCE figures from the US authorities.
In advance, it was expected that price growth would only climb to 2.6 percent, according to estimates obtained by Bloomberg. It stood at 2.5 percent in February.
Core inflation, which ignores the prices of food and energy goods, came in at 2.8 per cent on an annual basis. It was the same as in February, and a notch higher than the expectation of 2.7 per cent.
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PCE inflation is one of two central ways of measuring price growth in the US, and is the one preferred by the US central bank (Fed). The other, the consumer price index (CPI), climbed to 3.5 percent in March.
There was a good mood in Friday’s pre-trade on Wall Street both before and after today’s inflation figures. In the interest rate markets, there were no major effects after the release of the figures either.
Price inflation in the US has calmed down from high levels, but recently the decline has stopped. At the same time, the labor market has remained tight and the economy in general has performed relatively well.
The central bank’s inflation target is stable price growth of around two percent.
Greater doubt about interest rate cuts
Belief in interest rate cuts has been greatly reduced in recent months, and expectations about the first interest rate cut have been postponed.
The market is now pricing in only about a 10 percent chance of an interest rate cut in June, and the first interest rate cut will not be priced in until November. It is now a long way from pricing in two interest rate cuts this year.
The last time the US central bank came out with forecasts for the interest rate in March, the Fed members expected that there would be three interest rate cuts in the US in 2024. The interest rate has been allowed to remain at rest since July last year.
Federal Reserve Chairman Jerome Powell has repeatedly said that inflation is still too high. As recently as last week, he pointed out that there has been a “lack of further progress” when it comes to inflation.
Yesterday, inflation figures and less faith in interest rate cuts contributed to a decline on Wall Street. GDP numbers showed that the US economy grew less than expected in the first quarter, but analysts primarily pointed to PCE inflation for the entire first quarter climbing more than expected.
