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Inflation in the United States continued to rise in February, with the Consumer Price Index (CPI) increasing by 0.4 percent, exceeding economists’ expectations. Despite this, according to the CME FedWatch Tool, traders remain confident that the Federal Reserve will begin cutting interest rates in June as they adjust their expectations based on the current economic conditions and the potential impact on the central bank’s monetary policy decisions.
 

US CPI Rose 0.4% in February, Higher than Expected

According to the U.S. Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.4 percent in February, following a 0.3 percent increase in January.

Over the past 12 months, the index increased by 3.2 percent before seasonal adjustment. The shelter and gasoline indexes mainly contributed to the monthly increase, accounting for over sixty percent.

The energy index saw a 2.3 percent increase in February, with all component indexes rising, while the food index remained unchanged, with some components increasing and others decreasing.

The core CPI rose by 0.4 percent in February, driven by shelter, airline fares, motor vehicle insurance, apparel, and recreation increases. Over the last 12 months, this index increased by 3.8 percent. In contrast, the energy index decreased by 1.9 percent for the 12 months ending February, while the food index rose by 2.2 percent over the same period, with the food at home index increasing by 1.0 percent
 

Traders Remain Certain of Rate Cut in June

Robert Pavlik, senior portfolio manager at Dakota Wealth, predicts that the Federal Reserve will implement three rate cuts throughout the year, with the first one expected to occur in June. This forecast aligns with the current market sentiment, as traders perceive a 62% chance of the first rate cut taking place in June, according to the CME FedWatch Tool. However, this percentage has slightly decreased from the previous figure of 71%.

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