US inflation higher than expected, making May rate cut unlikely, June cut possible

From Morningstar:

The February Consumer Price Index report revealed higher-than-expected inflation in the US, with prices rising at a 3.2% rate from a year earlier. Shelter costs and gas prices were prime drivers of the increase, pushing core CPI to a 3.8% rise. This makes a May rate cut by the Federal Reserve unlikely, but a June cut is possible.

Shelter costs continue to drive up inflation, with gas prices and higher core goods and services contributing as well. Despite an improvement from the peak in 2022, inflation remains high. The February CPI report suggests a possible rate cut by the Fed in June, with inflation expected to improve in the coming months.

The bond futures market predicts a 58% chance of a quarter-point cut in the federal-funds rate, lowering the target range to 5.00%-5.25%. Traders now anticipate fewer rate cuts in 2024, with expectations shifting from six to four or five cuts. The Fed may consider lowering rates in June based on inflation and economic growth trends.



Read more at Morningstar: Has US Inflation Data Killed Off May’s Fed Rate Cut?