United States: February inflation drops four tenths, to 6% per year

The price index, however, continues to be high for the goals of the Central Bank (FED) which aspires to 2% per year.

The interannual rate of inflation in the United States continued to fall in February, for the eighth consecutive month, and stood at 6%, four tenths below that of January, according to data offered this Tuesday by the Bureau of Labor Statistics (BLS, in English).

However, in monthly terms consumer prices rose four tenths, at a time when the Federal Reserve faces great scrutiny for its measures to curb inflation, and more now after the debacle of the Silicon Valley Bank (SVB) and fears of a banking crisis.

Although prices are rising much faster than the Fed wants, some economists expect the central bank to end its yearlong streak of interest rate hikes when it meets next week.

Customers line up to enter a Glossier store in SoHo, New York. Photo: Bloomberg

With the collapse of two big banks since Friday fueling anxiety about other regional banks, the Fed may, for now, focus more on boosting confidence in the financial system than on its long-term campaign to rein in inflation.

That’s a sharp reversal from just a week ago, when Chairman Jerome Powell suggested to a Senate committee that if inflation didn’t cool, the Fed could raise its benchmark interest rate a substantial half point at its meeting on the 21st and March 22.

When the Federal Reserve raises its benchmark rate, it typically leads to higher rates on mortgages, auto loans, credit cards, and many business loans.

The evolution of inflation

When compared to prices a year ago, inflation has been declining for eight months.

In February, consumer prices rose 6% over the previous 12 months, below January’s 6.4% year-on-year increase and well below a recent peak of 9.1% in June. However, it remains well above the Fed’s 2% annual inflation target.

Core prices in February were up 5.5% from 12 months ago, slightly less than 5.6% in January.

Inflationary pressures remain entrenched in much of the economy. Rents, grocery prices, and the cost of hotels, restaurants, and airline flights have risen as more Americans seek housing and spend money on travel, dining, and entertainment events.

Jerome Powell. Foto: Drew Angerer/Getty Images/AFP

Jan Hatzius, chief economist at Goldman Sachs, said Goldman now believes Fed policymakers will halt their rate hikes next week.

Goldman had previously forecast a quarter-point rise. In a note to clients, Hatzius noted that the Fed, for now, seems even more focused on calming the banking sector and financial markets than fighting inflation.

AP AND EFE

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