The US Department of Labor released the Consumer Price Index (CPI) report on Tuesday. Although inflation increased in February on a year-over-year basis, the increase was expected and the annual inflation rate for all items was 6%. Cooling inflation has eased some concerns, but fears of financial contagion have spread. Market strategists further anticipate the US central bank’s decision on the federal funds rate.
Market awaits Fed rate decision after CPI report
In February, inflation was consistent with expectations, with the consumer price index (CPI) rising 0.4% last month, equivalent to an annual pace of 6%, according to the latest report from the US Bureau of Labor Statistics. “Over the past 12 months, the all items index increased 6% before seasonal adjustment,” the CPI report states. “The housing index was the largest contributor to the monthly increase for all items, accounting for more than 70% of the increase, while the food, recreation, and home furnishings and operations indices also contributed.”
General stock market sentiment has improved as three of the four benchmark US stock indices, with the exception of the Russell 2000, posted gains. However, on Monday, three of the four benchmark indices were down, except for the Nasdaq Composite. In addition, Monday marked the biggest drop in three days in the two-year Treasury yield since “Black Monday” in 1987. However, on Tuesday, following the CPI report, the two-year Treasury yield bounced back.
According to Kevin Cummins, chief US economist at Natwest Markets, while consumer inflation has eased, it did not have a significant impact on the market. “As far as how important we thought this (CPI) was going to be, it’s definitely not that important now to move the market, given the context,” Cummins said in a statement. interview with CNBC. The Natwest Markets analyst also anticipates the Fed will not raise the federal funds rate in March. While stock markets showed some improvement after the Labor Department’s CPI report was released, precious metals such as gold and silver experienced a small dip at 9:00 a.m. (ET) on Tuesday.
The day before, on Monday, the price of gold rose 2% and the cost of an ounce of silver rose 6% against the US dollar. However, based on the New York spot price, both precious metals saw a drop at 9:00 am Tuesday, with gold falling 0.80% and silver 0.71%. By contrast, cryptocurrencies experienced a significant rally, with the global crypto market capitalization rising by 11.17% to $1.13 trillion. bitcoin (BTC) rose 14.72% above $26,000 per zone unit, and the second leading crypto asset ethereum (ETH), rose 8.43% to $1,744 per ether.
What do you think the US central bank’s decision on the federal funds rate will be, and how do you think it will affect the economy and financial markets in general? Share your thoughts in the comments below.
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