The United States' core CPI remained resilient in February 2024, despite the fact that the supercore CPI (core CPI excluding tenants' and owners' equivalent rent) continued to fall. After reporting unexpected strength in January, the core CPI surprised again in February, rising 0.3% on a monthly basis and 3.8% year on year. On a monthly basis, core goods rose 0.1%, the first increase since May 2023; while core services rose 0.5%. Some of the unexpected price increases in core CPI components included increases in travel and used car pricing. On the other side, higher energy prices promote headline inflation. On a monthly basis, the energy price component increased by 2.3%, sending inflation up 0.4%.

Sentiment was dampened by the announcement of Producer Price Index (PPI) data, which also exceeded expectations. The hike in energy costs is also expected to boost February's headline PPI to 0.6%. The release of this data has driven volatility in both the stock and bond markets. Investors' perceptions are changing; formerly, the Fed was expected to cut interest rates by up to 125 bps this year; currently, it is expected to be lowered by up to 75 bps. As a result, the meeting on March 19-20 will be critical for investors to manage their portfolios.

Source: Bloomberg